The Price of Free

One of the peculiar things about the software industry, and by extension the digital economy, is that the cost of manufacturing stuff is effectively zero. Once you've created one copy of a software application, MP3 file, online news story, or video, the cost of creating a million duplicates is close to nothing. This isn't true of any other industry I know, with the possible exception of financial services, where the commodity (but not the service itself) is also virtual.

This peculiarity can have strange consequences. Take the open source software model: the premise here is that an army of dedicated individuals can pool resources to create a piece of software they can all use and maintain with no license costs. The model presupposes large numbers and common interests, so works best on ubiquitous or commodity applications – web browsers, word processors, operating systems. (I'm writing this using OpenOffice running on Linux and the experience is faster, better and definitely cheaper than Word on Windows.) Stating the obvious, there's never going to be an open source car, or loaf of bread, or pair of socks; we could readily design one, possibly agree that it fits the needs of a very large number of users, but you'd then have to manufacture and ship it, so what's the point?

Open source works for another reason – producers are are also consumers. People that contribute to open source almost always have some self-interest as users of what they create. In fact, most contributions to major open source projects such as the Linux operating system are employed by companies that use it heavily or are engaged in offering it as a product with paid-for support services. This is communism as the dictionary originally defined it, put to the service of capitalism.

Over the last few years we've seen more and more of our lives get translated from our analog reality to the digital otherworld. In the process, there's been a huge shift in how we consume news and entertainment, and the peculiarity of 'no manufacturing costs' has come into play. Trouble is, most people conflate this with “free.”


At the heart of this debate is an argument often reduced to the aphorism “information wants to be free.” In the political sense we might all agree with this, but in the dollars-and-cents sense it's hard to see how this would work. In the dollars-and-cents sense, most useful information has a real cost. When a composer writes a tune, or a journalist a breaking news story, there's often considerable resources involved. It takes work, and inspiration, and training. Yet in much of the digital world today, the presupposition is that everything can and should be free. In a recent BBC interview the director Steven Soderbergh argued that this was an attack on the notion of the professional, something echoed by Nick Carr. In my view, free only makes sense when you have a model close to that of open source software – where consumers are also providers, which liberates information from having real ownership. Otherwise, you gotta pay if you want anything of real value.

Bloggers need an Ombudsman

Ask any First Amendment lawyer and they'll tell you that the press have the right to be wrong. Journalists can and do make mistakes all the time, and in the vast majority of cases the usual recourse is to print a correction after the fact, usually unsatisfactorily buried somewhere at the back of the newspaper. But what happens when this isn't enough, when the law is broken, or when there's a disagreement about the facts of the issue?

Enter the Ombudsman. Almost all major daily newspaper and most magazines employ someone to act as a referee between the publication, its editors and reports, and external parties. The Ombud* works off a code of business ethics and the existing laws that protect against libel, slander and the like. They will vet a complaint and try and arrive at a fair outcome. They exist as a recognition that the mass media command a loud megaphone, and the subjects of which they write usually do not.

Often, the Ombudsman is trying to balance contradictory ethical and legal issues, such as with the New York Times' coverage of the Duke University rape case. Other times, they're dealing with issues that can seem entirely absurd, as with criticisms leveled by Fox News at producers of the kids show Sesame Street, which did a very funny parody of cable news shows, including Fox.

Ombudsmen exist in other walks of life too, including politics. Even the large industry analyst firms employ them. And if you blog at a reputable publication's website, the ombudsman will pay attention.

Many blogs now purport to be legit news outlets, and a lot live up to the billing. But to be credible, they need to be accountable – and most fail at this. And having the ability to post a comment at a blog does not in any way constitute a retraction or formal correction.

What bloggers need is an Ombudsman of their own. They need an independent third-party that will provide redress when bloggers get it wrong. Recent FTC rulings could be enforced, along with much broader issues about conflicts of interest. One approach would be to have someone like the Organization of News Ombudsman (ONO) take on the role, possibly by certifying blogs that they work with and providing an Ombudsman that could deal with complaints across their member bloggers.

Credibility is one of the hallmarks of great journalism, and independent bloggers will struggle to gain this level of trust with their readers until they are more accountable.

*(apparently a gender-neutral and politically correct reference, although to me it sounds like something you'd plant in your yard)

What's in a Name?

"What's in a name? That which we call a rose
By any other name would smell as sweet."

Shakespeare clearly hadn't heard about branding. The name of a thing, be it a product, company or even a person, is seen by branding professionals a critical step in driving perception, value and success. Marketing consultancies make a lot of money devising names-as-brands, something that's been in my mind a lot lately: in my day job, we're sweating over the naming of some new products we're launching. Of course, the names of things matters outside the world of branding, and we marketeers can learn a lot here.

A few years back the author David Lodge wrote a wonderful essay about names in literature and how they can have either connotative or denotative meaning. To understand what he means here, think about the discount home goods chain “Lowes” (connotative of their pricing and value) and their arch-rivals Home Depot (denotative, it says what they are). In literature all names are fair game for manipulation. Dickens particularly understood how names drive character: think the diminutive, contracted “Pip” and and the frightening Miss Haversham from Great Expectations (saying “Haversham” out loud, one syllable at a time, will extract the connotation). Nabokov famously made his eponymous heroine's name physical: Lo-lee-ta: the tip of the tongue taking a trip of three steps down the palate to tap, at three, on the teeth. Lo. Lee. Ta. J. K. Rowling has great fun with her magical names: Mad-Eye Moody, Severus Snape, Fudge, Malfoy. In fact, names are so powerful in fiction that their absence can be used to great dramatic effect, such as the unnamed narrator in Du Maurier's Rebecca or the man and boy of McCarthy's superb The Road.

So what about tech world naming? Intel and Oracle are two very different companies, but judged just on the intended connotation of their names they have the same lofty aspirations. Microsoft and IBM are contractions and acronyms, and take the say-what-we-do approach. Google, Amazon and Pandora all have obscure origins and associations, but you really wouldn't extract much meaning from the names by themselves. The current trend in tech company names is to murder ordinary words – Flickr, Digg and Zune are good examples – probably in an attempt to land a decent domain name and get a watertight trademark. TheNameInspector has a very good list of IT company names.

In my day job the chore is to avoid the three-letter-acronym (which of course has its own acronym, TLA) product naming trap. It's challenging, although I try to remember that Shakespeare probably did have it right, after all: If the product's any good, who cares what it's called? Meaning follows naming and there's no short-cuts to the laborious process of creating a real brand.

Are Gartner, Forrester and IDC like Moody's, Fitch and S&P?

Word is, we're getting over the current recession and things are going to be just peachy any day now, so naturally it's time to name the guilty and hold them accountable for the fine mess they've gotten us into.

Who to blame? Rarely at the top of the list of black-hearted, no-good, fat-cat swindlers who made all our 401Ks vanish are the ratings agencies: Fitch Ratings, Standard & Poors, and Moody's. But they played a key part in the financial meltdown: these are the organizations that assign credit ratings on banks, companies and others that issue debt obligations such as a bond issued by the State of California or a mortgage-backed security issued by Lehman Brothers. The agencies got into all sorts of trouble this year because of an obvious conflict of interest: agency analysts are paid by the same firms they rate. There's a bunch of hearings going on where various ex-employees of the agencies are saying they had all sort of pressure placed on them to overestimate the worth of otherwise dodgy and unintelligible financial instruments like credit default swaps.

Hmmm.... conflict of interest by analysts paid by the firm they rate.... sound familiar?

Industry analysts the world over derive a good chunk of their revenues – in many cases all of their revenues – from the very technology firms they then write about. When Gartner rates vendors on a Magic Quadrant or Forrester does the same in a Wave, there's a good chance that the majority of the vendors they judge are paying clients.

For sure there's differences between industry analysts and the financial rating firms. First, for most industry analysts, fees paid by technology vendors aren't ear-marked specifically to fund a “ratings report”. Especially for the bigger analysts like Gartner, Forrester and IDC, any fees paid by vendors are for general access to written research and advisory services. Second, most reputable industry analysts have a strong account base among end-users of technology – most large companies around the world have subscriptions to industry analysts so that their IT staff can get informed opinions on products and services. This means that only a fraction of their overall revenues come from vendors – in the case of Gartner and Forrester, perhaps 30-35 percent. That said, a lot of smaller firms are almost entirely reliant on vendors subscription fees to be in business.

All this came to mind when I read Gartner analyst Thomas Bittman's excellent rant on how his integrity is often questioned. Bittman points out that in 14 years as an analyst he's never let vendors unduly influence his reports, although he says he “understands” why the marketplace has the impression that “analyst firms can be bought.”

Responding to Bittman, the good people at Sage Circle, an advisory firm for vendor analyst relations professionals, point out that you don't need to be a Gartner client to get a very strong rating, and that the correlation between payment and judgment is very poor. Shamus McGillicuddy at IT Knowledge Exchange points out the inherent conflicts analysts face when they take money from vendors and consumers.

The problem is that Bittman's argument is little different than the defense made by the ratings agencies. In both cases, no matter the integrity of individual analysts, there is the clear appearance of a conflict of interest. As Bittman himself states, the marketplace will always believe that it is harder to criticize a paying client than a non-paying one.

The ways Social Media is changing the news

Stating the painfully obvious, social media is completely changing the way news is gathered and shared. It's also rewriting the economics of the news business. But because of social media, is news itself changing? In other words, is news new?

I can see some obvious ways that social media is changing the substance and character of the news:


Velocity – The news business has always been about first-to-market advantage. Getting the scoop and being first was always the goal, and social media is clearly a news accelerator. Social media makes all news almost instant.

Volume – a side effect of social media is that the shear amount of news that we get is becoming overwhelming. It is repetitive, overlapping, redundant, contradictory and endless.

Veracity – A recent Pew Research report showed ratings for press accuracy had hit a two-decade low. The straightforward factual accuracy of a lot of news – in fact, the paucity of anything approaching a fact in a lot of news reports – makes this finding unsurprising.

Validity – It's getting harder to take news at face value. It's difficult to know if a news source is always credible, and almost impossible to verify.

Value – the real dollars-and-cents value of a lot of news is plummeting, a victim of over-supply. The news market is saturated and the barriers to entry as a news source have fallen away.

What have I missed?

What if Marshall McLuhan was alive and on Twitter?

Marshall's Diary Sept 19 2009

Dear Diary:

If anyone had really bothered to read any of my books and pay attention they'd know that so-called “social media” is (a) a disagreeable tautology and (b) my invention.

(Note to self: is “disagreeable tautology” also a tautology? Can you have an agreeable tautology?)

Just today I came across a new example of said social media, hideously described as a “new invention” (tautology!) and named, in typical twee fashion, Twitter. The chattering classes are now the twittering classes, and everyone is aflutter about how this is revolutionizing the way we communicate. There's no question that this Twitter thing has really taken flight - even people I know and like are using it.

Reluctantly, I need to join the flock. I need to make it plain that if it wasn't for my genius, foresight and erudition we'd all still be licking stamps and twiddling the rabbit-ears on the tops of our television sets, or something like that. I'm the Global Village Guy, goddammit!

My start with Twitter was not auspicious. When I tried to register as “Marshall McLuhan” I discovered that a namesake had already taken my identity, complete with my photograph (not too bad, actually). The impostor has the gall to be quoting me as me (tautology?). I took this as a considerable affront, especially since some of the material wasn't exactly in context, if there is any context to be “in” on the Internet (Note to self: Is there a book in this idea? Maybe the OuterNet???).

I tried reaching the owners of Twitter to no avail (employees of Twitter are Twits, I presume, har-har). I later found out that when it comes to having an identity crisis I'm in very good company: also on Twitter is Albert Einstein (rambling), Charles Darwin (literally rambling, he seems to have restarted his journey on The Beagle), and even by good pal Marty Heidegger (who pretty much out-rambles anyone I know).

Anyway, after extensive clicking I discovered I was relegated to “MarshallMcLuhan2,” which is humiliating to say the very least. Now that I think about it, this Global Village thingy has a way of humbling you. All the world is within my reach and I feel as small as an ant.

But now to work. I need to regain myself. And most important, I have to set the record straight on why I nailed the whole social media thingy way back in 1960-something, before even The Beatles and when computers ran on rolls of paper just like my dear mother's Player Piano, and when newspapers actually made money. But I digress....

I thought a pithy first post might be this little zinger:

MarhsallMcLuhan2: In Tetrad form, the artifact is seen to be not neutral or passive, but an active logos or utterance of the human mind or body that transforms the user and his ground.

Captures the whole idea nicely I think. Not too obvious, straightforward or dare I say it, even intelligible to anyone who hasn't pondered my opus for some considerable time. Then this happened:

MarshallMcLuhan2: In Tetrad form, the artifact is seen to be not neutral or passive, but an active logos or utterance of the human mind or body that transforms...

Turns out, Twitter assumes we all have an attention span of the average newt and limits posts to a meager 140 characters. A Dickens novel has more than 140 characters! “Existential angst” has 16 characters alone!

Crap. Ah, to hell with it:

MarshallMcLuhan2: The medium is the message.

-----------------------------------------------------------------------------------

"When things come at you very fast, naturally you lose touch with yourself. Anybody moving into a new world loses identity...So loss of identity is something that happens in rapid change. But everybody at the speed of light tends to become a nobody. This is what's called the masked man. The masked man has no identity. He is so deeply involved in other people that he doesn't have any personal identity."
-- The real McLuhan, quoted in Forward Through The Rearview Mirror

Social media, the Associated Press, and row boats

In the early 1800s most news came to America across the Atlantic aboard ships, and arrived weeks old. Old perhaps, but still valuable: news of wars, politics, and commerce commanded a price. Thus an enterprising newsman named Harry Blake, working for the Boston Courier, came up with a clever idea and began haunting the wharfs of Boston to scoop stories, eventually venturing out in a small boat to meet ships before they even berthed. Over time news organizations got competitive and began sending schooners as far as 200 miles out to sea to meet boats and get copies of newspapers and reports from sailors. By the late 1820s David Hale, who had recently taken over the failing New York-based Journal of Commerce, reinvented news gathering:

It will be a primary object to render the Journal a first rate commercial paper, worthy of the city. To this end an extensive correspondence will be maintained, the most ably conducted periodicals will be taken, and no pains nor expense will be spared to procure authentic reviews of the markets, prices current &c. It will be necessary to maintain a boat establishment for the collection of marine news; and this must be done at our individual cost, as the public and our establishment will be benefited by competition...

- Journal of Commerce, September 1, 1828

By setting out to sea Hale was able to gather information about European crop harvests, the prices of goods , the fortunes of nations, and a world of other information that could be traded on for profit. But he didn't stop there. In 1849 he pooled resources with several other newspapers and started running a boat and pony express network to quickly get news to New York from the inbound mail steamers that first docked in Halifax, Nova Scotia. This was the birth of the Associated Press.

Fast forward to 2009. RavenPack is a small New York-based company that “provides dynamically tagged news feeds and analytics that meet the accuracy and low latency requirements of today’s markets.” Translation: RavenPack's software automatically sifts through news to very quickly decide what a story is about, and whether it is positive or negative. “Very quickly” in this context means processing hundreds of stories a few thousandth of a second after their publication. RavenPack sells the system to financial companies who use it to help make trading decisions. The company claims that in 90 percent of cases the information they provide can be used to profitably decide which stocks to buy, sell or hold.

I'd argue there's very little difference between Harry Blake rowing across the Boston harbor and RavenPack racing through terabytes of data: they are both in pursuit of news, and they both understand the value of getting the scoop. From a strict news perspective, all that has changed is the technology, velocity and volume.

And when we think of social media, we should see it for what it is – an improvement over a row boat. Social media is just a new means of delivery.