Jerry Brito

Tomorrow at noon Facebook will be hosting one of its “Facebook DC Live” events featuring William Powers, author of Hamlet’s Blackberry: A Practical Philosophy for Building a Good Life. I interviewed Powers on the Surprisingly Free podcast last year about his book.

What I like so much about Powers and his books is that he gracefully tackles what is no doubt a fact: that like all new technologies the Internet comes not just with benefits, but with costs as well. In the Internet’s case the costs that most folks have identified have to do with “what it’s doing to our brains” and attention spans. Unlike other authors on the same topic that I’ve read and interviewed, like Nick Carr, Jaron Lanier, Susan Maushart, and Elias Aboujaoude, Powers doesn’t overplay his concern or sound alarm bells of doom. Instead, he gives a very upbeat account of how great minds throughout history have dealt with technological change.

The punchline: be mindful of your action, and take a break once in a while. Wonderful advice wrapped in great stories and good philosophy; cyber-doom need not apply. So, check him out on the live stream tomorrow and you’ll be able to chat and ask questions.

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FTC Chairman says will probe Apple in-app purchases for marketing practices: http://wapo.st/fX3uWnless than a minute ago via TweetDeck

The Washington Post’s Cecilia Kang reports that the FTC will probe Apple for in-app purchases marketing practices. According to Kang,

FTC Chairman Jon Leibowitz wrote in a letter to Rep. Ed Markey (D-Mass.) that the practice of “in-app purchases” for certain applications on Apple iPhones, iPads and iPods raised concerns that consumers may not fully understand the ramifications of those charges. The Washington Post wrote about hefty charges amassed by children using Apple device games that public interest groups said should not be included in software geared for children. Some parents said their children didn’t understand the difference between real and pretend purchases for items such as $99 barrels of Smurfberries on the Capcom Interactive game Smurfs Village.

I’ll skip the question of whether it’s the proper role of the federal government to be a surrogate parent to children given iPhones by their real parents. Instead I’ll simply say that I don’t know how much easier we can expect Apple to make it for parents to supervise their children.

• Passwords All purchases on iOS devices require the user to enter a password before it can be completed. Don’t give your child the password and you don’t have to worry about charges.

• Allowances If you do want to allow your child to make purchases, but what to set some limits, Apple makes it easy to create an iTunes allowance account that allows a parent to specify an amount that is added to a child’s account each month. Once the child uses the amount, he can’t spend any more.

What more do we want Apple to do?

The purpose of the antitrust laws is to protect consumers, not companies, so the simple fact that Apple will take a 30% cut from publishers who want to offer subscriptions on iOS devices should not be enough to trigger scrutiny. So, my guess at what a theory of consumer harm against Apple might be is this: Apple not only takes a 30% cut of any subscription purchased in-app on an iOS device, it also requires publishers to offer as low a price on iOS as they offer anywhere else. Therefore, a case could be made that a publisher faced with Apple’s 30% fee (and unable to simply raise prices by 30% just on Apple’s devices) might raise prices on all platforms enough to cover Apple’s cut. So, assuming market power of course, Apple’s new policy could affect all digital subscription pricing.

Yet it’s hard to talk about market power in such a nascent sector. Digital subscriptions didn’t exist 5 years ago, and they do now in large part thanks to Apple. The right market structure is sorting itself out right now and yes, Apple does seem to have a well-earned lead as the innovator in the space. But if the original Mac taught us anything, is that a lead in a nascent sector is no guarantee of monopoly and regulators would be creating serious disincentives to innovation if they meddle.

Digital publishing is very much a contestable market. I hardly need to point out that the day after Apple’s announcement, Google made public its own very competitive subscription service. And while the iPad is ahead of the game right now, Android tablets are only now beginning to hit the market. If declining iPhone market share is any indication, Android will nip at Apple’s heels in the tablet space as well. And let’s not forget other formidable (and somewhat-formidable) competitors in the likes of HP’s WebOS, Microsoft-Nokia, and RIM.

Moreover, while the consumer harm is speculative, the potential consumer benefits of Apple’s subscription service are pretty clear:

• Ease of Use & Security: Apple’s app store is a tremendous innovation if nothing else because it creates a simple payment system consumers trust. iPad users will tell you they much prefer one-click subscriptions managed through Apple than having to create many accounts with disparate publishers, which incidentally improves security.
• Privacy: One thing that sets Google’s offering apart from Apple’s is that they will share with publishers information about subscribers. Apple, on the other hand, gives users the choice of sharing information with publishers, and then it’s only limited information. This should please privacy conscious consumers.
• Subsidized Devices: As a recently viral article in Wired suggests, the reason Apple is able to offer the iPad entry price of $500 (which rivals are having a hard time meeting) is that Apple is a vertically integrated company. This means that the 30% from subscriptions potentially subsidizes the iPad’s low price, thus benefitting consumers.

My last post on the opportunities presented by “The Great Stagnation” got a bit of attention, and I’m heartened by that because I’d like to develop my conception of “opting out” a bit more in later posts. Today I’d just like to respond to my friend and Colleague Tate Watkins who reacted to my post noting that “most people don’t want any more leisure. People don’t work 20 hours a week because they would have to make up the difference ‘playing with [their] families and reading books.’”

Tate says that spending that much time doing nothing, and doing it with their families, is likely a net minus for most people. I think he’s absolutely right, so I guess I need to define what I mean by “leisure” when I say that “the cost of leisure is going down” allowing us to consume more of it.

I’m not sure economists have a very clear definition of “leisure.” Generally it’s thought of as any activity that’s not work.(Please correct me.) I think that’s a good start, but the way I conceive leisure it could include work, just not work that one has to do to earn income.

Take for example Cato’s Bob Levy, who is one of the persons I most admire in this world. Bob got his PhD in business in 1966 and started an investment technologies firm that he built up and sold in 1991. At this point, Bob was financially independent and could lead a life of leisure. What did he do? He came to George Mason Law and pursued a law degree. In his 50s he interned at IJ and clerked for federal judges, just like other bright people out of law school. After that he served full-time as a legal scholar at Cato and, as far as I know, always contributed to the Institute more than he took in salary. Do you call Bob’s activity work or leisure?

Now, Bob was able to pursue his leisure activities because he worked hard to accumulate wealth. But what if we approached it from the other direction? If the activities you want to pursue are inexpensive because the cost of leisure is coming down, then perhaps you can “opt out,” pursue leisure, and cover your living expenses with minimum work. Consider the woman I wrote about yesterday. She was supporting herself and her husband on $24,000 a year she makes through bloggin and web design. She fills her time with outdoor activities and volunteering.

A couple of things to keep in mind: To do this one would have to probably accept a standard of living that is at or below the median. But of course this ignores Tyler’s point that increases to happiness are more and more becoming internal to the human mind and aren’t captured in the usual living standard measures. Also, it seems to me that the option to “opt out” will be available first to knowledge workers because they have greater flexibility about their work and because they are more likely to be the ones to enjoy the gains from internal economies.

In his column on Monday, David Brooks put his finger on what I found most interesting about Tyler Cowen’s The Great Stagnation. Namely:

It could be that in an industrial economy people develop a materialist mind-set and believe that improving their income is the same thing as improving their quality of life. But in an affluent information-driven world, people embrace the postmaterialist mind-set. They realize they can improve their quality of life without actually producing more wealth.

As Tyler points out in this book, and catalogued at length in his other excellent book, Create Your Own Economy, recent increases in happiness come from growth in internal economies. That is, internal to humans. In the past, increased well-being came from not having a toilet and then having one, or the invention of cheap air travel. Today they come from blogging, watching Lost on Netflix, listening to a symphony from iTunes, tweeting with your friends, seeing their pictures on Facebook or Path, and learning and collaborating on Wikipedia. As a result, once one secures a certain income to cover basic needs, greater happiness and well-being can be had for virtually nothing.

The problem some see with this is that the Internet sector, while it may give us amazing innovations, produces little by way of revenue or jobs. Brooks also laments that because American’s have not come to grips with this growing distinction between wealth and standard of living, we tend to live beyond our means, which is certainly true in a personal and public fiscal sense.

But I’d like to see this seeming decoupling of wealth and well-being as an opportunity.

If we’ve doubled our productivity over the last 50 years, why are we not working 20 hours a week and enjoying the difference playing with our families and reading books? Well, it’s because the opportunity cost of leisure is high. Time spent on leisure means time not spent generating income, and if happiness is tied to material wealth, then that may be an expensive trade-off.

However, if happiness is increasingly decoupled from material wealth, then perhaps the cost of leisure is going down and we can finally afford to indulge in more of it. If you can grasp the distinction, then you realize that it is now truer than ever that beyond a certain point, accumulating more material wealth will not contribute to your happiness. The opportunity that presents itself is to live “below your means” yet be happier than ever.

Though anecdotal, there is some evidence that young people are choosing this route and “opting out.” Here’s a NYT “trend piece” on the topic. One of its subjects is a 31-year-old woman who traded her investment management job for more leisure:

Today, three years after Ms. Strobel and Mr. Smith began downsizing, they live in Portland, Ore., in a spare, 400-square-foot studio with a nice-sized kitchen. Mr. Smith is completing a doctorate in physiology; Ms. Strobel happily works from home as a Web designer and freelance writer. She owns four plates, three pairs of shoes and two pots. With Mr. Smith in his final weeks of school, Ms. Strobel’s income of about $24,000 a year covers their bills. They are still car-free but have bikes. One other thing they no longer have: $30,000 of debt.

Ms. Strobel’s mother is impressed. Now the couple have money to travel and to contribute to the education funds of nieces and nephews. And because their debt is paid off, Ms. Strobel works fewer hours, giving her time to be outdoors, and to volunteer, which she does about four hours a week for a nonprofit outreach program called Living Yoga.

Portland, as Fred Armisen tells us, is where young people go to retire. Now, what I haven’t considered are the effects of “opting out” on innovation, or the distributional issues. (That is, can everyone afford to sleep ‘til eleven?) I’ll try to address these in later posts.

UPDATE: Geniuses think alike. Jacob Grier points me to the Oregon Economics Blog’s similar take on Portland as youth magnet. For the record, that post was published at 8:47am PST, and my post at 7:20am PST. ;o)

Speaking at the Mobile World Congress in Barcelona today, Twitter CEO Dick Costolo said he wants the service to become as ubiquitous and simple as tap water. But he should be careful what he wishes for.

Search Engine Land is already asking, “Twitter As Utility, Like Running Water?” The thing about water is that it tends to be an indispensable natural monopoly, and therefore regulated. Twitter today controls access to its “firehose” of tweet data, but access to utilities like water is mandated open and prices are set by regulators.

As I discussed recently on the podcast with Danny Sullivan, some have already suggested Google should be treated like a utility and brought under a regime of “search neutrality.” Harvard’s danah boyd has been banging the “regulate Facebook as a utility” drum for quite some time. And Just today Wharton’s Kevin Werbach put out a draft of his new law review article: “The Network Utility.”

Of course, as I already mentioned, it’s unsurmountable monopolies that should be regulated, and it would be a stretch to say that either Facebook or Twitter qualify. But I fear we’ll be hearing more and more of this “utility” language in the near future.