The revolution will be televised: A teaching moment.

As a parent I view the modern era of hyper-connection as an infinite opportunity for teaching moments. My children humor my pursuit, bless them. I do worry that they perceive their father’s aspirations as random outbursts of unconnected insights, barely distinguishable from the indecipherable utterings in Ezekiel’s visions, and vested with much less authority. Yet, I persist.

On a recent Saturday I became a taxi driver for my oldest son, and drove him home from the gym. Something by Gil-Scott Heron came up on the bop jazz channel on the car’s satellite radio. Heron’s rebellious expressions made him famous, but today the radio played themes of love. It was one of Heron’s earlier and milder pieces.

The jockeys experiment on this channel on the weekends, taking the music to the edges, though this hardly qualified as an edge. Though Heron is not regarded as a jazz pioneer in most circles, the beat poets influenced him, and he borrowed many of their rebellious forms for individualized expressions.

My son stared out the window, rendered silent by one of those adolescent moods in which sentences never exceed three words. Sometimes the mood can last for months.

Looking for an opening, I faked surprise. “Well, look at that.” I said with an upbeat tone, “It is Gil Scott-Heron.” This registered nothing from the passenger seat, not even a curious question, such as “Who is Gil Scott-Heron?” Was my son listening or descending into a month-long silence? He remained motionless.

A father has to be intellectual resourceful at these moments. I gambled, and issued an overstatement that I hoped might catch his attention. “Some people regard Gil Scott-Heron as the father of Hip-Hop and Rap.” If my son was at all paying attention, he would regard this sentence as a stretch, at best. The present song more closely resembled a male rendition of something acceptable to Ella Fiztgerald. Nothing about this love song would suggest such a radical interpretation. Still, the music contained enough rhythm to be catchy. My son stirred, and I sensed he was listening to me.

If the hook was in, then perhaps he would take the bait. “His most famous song was something called ‘The revolution will not be televised.’ Have you ever heard of that?”

“No.” My son shifted his weight while answering. Maybe I had him. This is what passes for a teaching moment in the suburbs.

“I will play it for you when we get home.” I promised, “You might like it.” No sound came from son, and we drove on.

The On Line Honesty Box

Many vendors give away free services, but usually there is a catch. For example, while Google has given away search services for more
than a decade, no user has any illusions as to why. Advertising buys space and tries to reach readers. As another example, for many years US cellular carriers came close to giving away handsets to customers (until expensive smartphones reduced the practice). Buyers knew these subsidies came with two-year commitments, and buyers could anticipate giving the carrier high service fees.

Free services without any apparent catches are rare, but it seems to happen with “honesty boxes.” It has always been so with street musicians. A listener can walk away or give any amount into an open hat—from nothing to any denomination of bill. Public campsites have relied on honesty boxes for years, letting campers fill out their permits, paying on their
honor. Office coffee pools frequently use honesty boxes as well.

What about the online world? There have been experiments with online honesty boxes. The lessons are quirky, but too interesting to ignore. Today’s column describes two—one from Radiohead, and another from Cards Against Humanity.

Calm Economics

Calm economics is a flavor of economics that prizes insight developed under the auspices of calm deliberation. Many participants in tech markets today digest calm economics daily. They know it when they see it in the Wall Street analysis, or during investor meetings, like the ones Warren Buffet conducts.

Look, I call this “calm economics” for lack of a better phrase, but the point goes beyond labels. Despite its pervasiveness, many engineers and managers find calm economics to be elusive. Especially when calm economics uses too much jargon or dry abstraction, readers find it challenging to discriminate between the good and otherwise. Yet, doing so can help formulate a firm’s strategy or analyze the market potential for profitability. Calm economics underlay fundamental questions in a wide set of circumstances.

There is no need to guess at the difference between the good and the pretender. It is possible to be systematic. As a step toward developing recognition for it, this column identifies several symptoms of calm economics done well.

Free Podcasts

Some folk like to read blogs. Some folk like to listen to podcasts. Why not give everyone the option to do what they prefer? Now it is possible to read or listen to many of the essays that appear in my IEEE Micro Economics column (and appear here as Essays).

The IEEE deserves credit for this initiative. They have started a program to record podcasts from their many columnists.  Kellogg’s Tim DeChant has helped me record more than a dozen (Thanks Tim!). There should be close to two dozen by the end of the year. Anyone can download them at IEEE’s Computing Now for free. Brandi Ortega manages the site (Thanks Brandi!). They also can be found on iTunes at no charge. Available so far are:

* Steve Jobs and the Economics of One Entrepreneur
* Direction of Broadband Spillover
* Digital Dark Matter
* Building Broadband Ahead of Digital Demand
* Gatekeeping Economics
* Digitization and Value Creation
* Standardization and Coordination
* Bleeding-Edge Mass Market Standards
* The Next Chapter at Google
* Network of Platforms
* Does Google Have Too Much Money?
* Soccer Mom Messaging Is the Poetry of Our Age
* Revolution in Spectrum Allocation

Please enjoy them!

A Big Payoff

Google and Apple are two of the most profitable companies on the globe today. They seem to share little in common except that achievement. They took very different paths to the stratosphere.

Google, after all, is less than a decade and a half old, a child of the web with a successful approach to advertising, built around a search engine and many services to enhance the user’s experience. Apple is more than twice as old. Its original product, personal computers, makes up a fraction of its sales today, while its future profitability lies with a mix of software in iTunes and new hardware introduced in the last decade—namely, phones, tablets, and portable music devices.

What economic insight emerges from setting these two firms next to one another? A brief discussion of both of their businesses will reveal something trite and something deep. The trite part is this: Some settings produce lots of market value, and some firms capture large parts of that value, but those rarely happen together. The deep part forms the key insight today: these examples are fabulously profitable because they are unique.

The range of Linus’ Law

After more than a decade of successful growth, Wikipedia continues to defy easy characterization. It receives more than 400 million viewers per month. Close to four million articles grace its web pages in English alone. Volunteers built the entire corpus of text.

This experience suggests that Wikipedia has done something right, but begs the question: Which actions mattered, and which ones were merely incidental? Answering that question is the key to finding general lessons for countless other web sites that aggregate user-generated content.

Many Wikipedians believe that Linus’ Law is an important ingredient in their sauce. Coined by Eric Raymond, this law is less legal precept than slogan—namely, “Given enough eyeballs, all bugs are shallow.”

Few people know that it is actually a pert and terse restatement of a quote from Linus Torvalds, who originally said, “Given a large enough beta-tester and co-developer base, almost every problem will be characterized quickly and the fix obvious to someone.” Raymond’s restatement drops all the qualifiers, vesting the proposition with more certitude and making it more egalitarian by extending it to nonexperts.

Wikipedia’s experience suggests Raymond was onto something. Let’s consider when the Law works and why it sometimes fails at Wikipedia.

The Grip of the Grid

The grid has a grip on the rhythms of my family. This is not news, really, but it took a new setting, a vacation, to make apparent what should have been obvious.

This August my wife and I went west for a vacation out west, in this case, to Lake Tahoe. It was a good vacation, but not an escape from the familiar. As with prior vacations, this one became a catalyst for reflecting on the role of information technology in our lives.

Perhaps resistance was futile, but mine was pathetic. I submitted my family to the grip of the grid almost from the outset, when I purposely rented a house with a broadband Internet connection. It even had a wireless modem.

This post will talk about how the grid took over our vacation. Ultimately, the grip of the grid never loosened completely. In retrospect, this was not all bad.

An Honest Policy Wonk

Captured regulators routinely take the blame for the ills of regulatory policy in electricity, telephony, and broadcasting. “Captured regulator” has been a pejorative term in these industries for decades.

It’s hard to say when it happened exactly, but this conversation migrated into electronics and the commercial Internet in the past decade, as both industries melded with communications and media businesses. Pieces of the topic even show up in the net neutrality debate.

Quite a bit of nuance got lost in the migration. While many episodes in the history of telephony and broadcasting illustrate regulatory capture, even the theory’s proponents know about exceptions—namely, situations that ought to have been captured but were not. For example, consider the Internet’s birth. There were numerous opportunities for regulatory capture in the Internet’s transfer out of government hands, and, yet, capture theory only explains part of the events and not the entire outcome.

I will refer to other episodes below, but for now, take that example as motivation for modifying the popular theory of regulatory capture. When does the regulatory environment work despite the tendencies toward regulatory capture? As best I can tell, the explanation has something to do with the presence of an honest policy wonk.

The grocery scanner and barcode economy

Think about the world of bar codes and scanners. What was life like before their invention? This post offers an appreciation for this staple of modern retail life.

Give the barcode its due. The widespread deployment of barcodes and scanners reduces the costs of keeping accurate and timely inventories. It happened quietly in the last few decades and had numerous consequences.

Think about it. The number of products on the shelf of a typical retail store has increased by tens of thousands. The accuracy of cashiers has increased tremendously because the cashiers do not have to pause to read the price tag. Firms keep better inventory so the frequency of stock-outs — missing items — also has declined.

More to the point, all of that happened because somebody took the time to develop the bar code. Somebody made effort to get everyone in the industry to invent the equipment to take advantage of barcodes.

Among the influential people in that effort was a fellow named Alan Haberman. He passed away last week.

I never knew the man, so I cannot wax eloquent about his life. But I know something about bar codes, as well as the economics of value built around such symbols. Modern life could not exist without them. That is why this post is not a eulogy. It is an appreciation.

It would be an exaggeration to say that barcodes set me on my life’s intellectual path, but they were an influential example when I was a fledgeling and impressionable scholar. The bar code was one of the three canonical examples of the new era unfolding before us in the 1980s, a world of new standardization and increased interoperability. (VCRs and PCs were the other two). Those three examples, as well as a few others, did motivate my interest in the economics of this phenomenon. As readers of this space know, I have stayed here because new examples arise all the time, and in such diverse areas as WiFi, travel intermediaries, the MP3 player, smart phone, and in many places online.

Alright, maybe I am (a little) nuts, but read on.

In appreciation to Haberman’s life’s work, this is an opportunity to wax on a bit about the joys of the scanner economy. Once you begin to recognize the economics of bar codes, you realize that these economics are everywhere.  I hope you find this interesting, illuminating, and a little amusing.

The Open Internet Order

After a year of hearings and considerable public discussion, the Federal Communications Commission (FCC) adopted the Open Internet Order on December 21, 2010.

Fireworks flared on the blogosphere almost immediately. Net neutrality advocates cried that the order betrayed and sold-out sacred principles, while Tea Party supporters heaped scornful criticism at government activism. Both sides made intemperate and grim forecasts about the Internet’s future.

Levelheadedness left the political sphere as well. Pushed hard by Tea Party sympathizers, the House of Representatives passed House Joint Resolution 37 in April 2011, largely along party lines, disapproving of the order. As of this writing, the Senate hasn’t yet taken up the measure. President Obama promises to veto it.

Frankly, this conversation needs a calm and considered middle ground, not utopian visions abutting practical considerations. The Internet has never lacked government oversight, and Internet participants have occasionally compromised on neutrality to function. There are subtle economic issues to debate here, and simplistic absolutes don’t contribute much to finding reasonable economic solutions.