Thursday, February 5, 2009

Saving the Newspaper Business

In the New York Times Opinion section today, there's an article discussing the possibility of micropayments as a source of revenue for newspapers.

Essentially, you'd pay a penny for an article or a nickel for an hour of access to a web site, or something like that, and over time that $30 per month you'd spend would fund that paper's journalistic endeavors. But who's got an extra $30 or $50 or $100 a month to pay for that stuff these days? Not enough people to support all but niche subscription sites.

The key to making the micropayment work is to get the payment from the ISP, not the user. Think about it: Cable companies pay millions of dollars to their content providers like ESPN or the Discovery Channel so that they have those channels to to offer subscribers. Why would we be paying both our ISP AND for the content we can get by getting online?

Since our shortsighted and stupid ISPs would never do this (remember, these were the greedy morons who wanted to charge extra for optimal web surfing speeds), what needs to happen is this:

Google realizes that its quest to organize all the world's information is compromised by a lack of quality investigative reporting and journalism. It also realizes that the current ISPs are greedy and shortsighted. So it commissions (with the blessing of the Obama administration) a nationwide network of high speed wireless service *for free*. At this point, everyone paying $30-$60 per month for high speed access now has extra money to be charged a micropayment calculated by Google.

If you scroll down in the Times article above, you'll see that the primary objection to micropayments is that the user will have to go through the trouble to decide whether a given article or link is worth two cents. That wouldn't be an issue if Google added it up for you and sent you the bill - likely $20-$25 per month, less than you're currently paying for access. Google would also sell far more ads and would be hugely profitable. (In the interest of avoiding a Google monopoly, perhaps another company (Microsoft or someone else could offer wireless access in many areas as well).

Problem solved - Newpapers get their revenue, users still pay the same or less for high speed access, and Google/Microsoft/Yahoo get their cut for administrating it and also by selling ads.

The big loses are the telecom companies, no longer charging us for use of their "pipes".

But they had it coming.

Can the Problem of Executive Pay Be Reduced to a Logical Fallacy?

It's well known that executive pay has gone up dramatically relative to the wages of ordinary workers the last 20-30 years, but that in and of itself doesn't mean our current system is wrong. It might be politically problematic, and it might seem unfair, but that's a separate question from whether those executives, particularly the CEOs, deserve their comparatively enormous salaries based on value and merit.

It seems the most basic argument in favor of CEOs receiving outsized paychecks is the "but for" one. But for my being here, the company wouldn't have made x billion dollars in profits. If the last CEO were here, it would have made y billion. So I should get a significant share in x-y billion dollars.

First off, it's hard to know for sure what the former CEO would have done, or more pertinently, an average CEO. But assuming the current CEO were correct, and the company made $8 billion instead of $4 billion that year, shouldn't he be entitled to a bonus of some percentage of the $4 billion extra, say 5 percent? If that were the case, he'd be making an extra $200 million.

Assuming for a moment that the company's profits were sustainable, and the CEO's efforts helped foster long-term growth and not merely growth on paper to boost the annual numbers, I'd still argue that the CEO likely does not deserve such a large cut even if the average CEO would have only produced $4 billion in profits.

That's because the CEO is merely a "but for" cause of the company's enhanced earnings, and not by any means the sole or even primary cause. The company was obviously poised to post phenomenal earnings given proper leadership, and the CEO provided that leadership. But had the company not been amenable to such improved growth, the CEO wouldn't have been able to make the difference.

To use a sports analogy - some teams will win a title only if you hire a great coach. And some won't no matter who is coaching. That a great coach takes a capable team to the title doesn't mean the coach is solely responsible. He is a but for cause. Accordingly, while the coach deserves credit and higher pay than a mediocre one, the team he inherited must also be taken into account.

The idea that a particular executive is worth whatever they have to pay him because without him the company would be doing far worse is a false one. The executive would also be doing far worse without a company amenable to such tremendous growth.