We hear a lot today about the importance of “disruptive innovation,” “deep technologies,”  “moonshots,” and even “technological miracles.” What do these terms mean and how are they related? Are they just silly clichés used to hype techno-exuberant books, articles, and speeches? Or do these terms have real meaning and importance?

This article explores those questions and argues that, while these terms are confronted with definitional challenges and occasional overuse, they retain real importance to human flourishing, economic growth, and societal progress.

Basic Concepts

Don Boudreaux defines moonshots as, “radical but feasible solutions to important problems” and Mike Cushing has referred to them as “innovation that achieves the previously unthinkable.” “Deep technology” is another buzzword being used to describe such revolutionary and important innovations. Swati Chaturvedi of investment firm Propel[x] says deep technologies are innovations that are “built on tangible scientific discoveries or engineering innovations” and “are trying to solve big issues that really affect the world around them.”

“Disruptive technology” or “game-changing innovations” are other terms that are often used in reference to technologies and inventions with major societal impacts. “Transformative technologies” is another increasingly popular term, albeit one focused mostly on health and wellness-related innovations.

However one defines them and whatever one calls them, it is clear, as a 2015 report from the World Economic Forum (WEF) argued, that, “the list of potentially disruptive technologies keeps getting longer.” “Inventions previously seen only in science fiction,” the WEF report said, “will enable us to connect and invent in ways we never have before.”

More concretely, when people use these terms in reference to existing technologies, or ones currently on the drawing board, they often mention innovations like:

• Artificial intelligence / machine learning / robotics
• 3D printing / additive manufacturing
• Self-repairing / self-building objects
• Driverless cars / flying cars (VTOL), supersonic transport
• Private space travel / lunar mining
• Clean power / alternative energy production
• Genetic editing & life extension technologies
• Implantable tech / human augmentation
• Hyper-connected devices / wearable fitness / sensor tech / IoT
• Precision medicine
• Neural networks
• Quantum computing
• Nanotechnology / synthetic biology
• Immersive technology (AT & VR)

This is just a partial list of the type of technologies that experts mention when discussing “moonshots,” deep tech,” and other “disruptive” or “transformative innovations.” What unifies them more than anything else is the potential for major improvements in human well-being. Significant advancements in these areas could lead to substantial jumps in human welfare, health, and longevity.

Definitional Limitations

These terms have some problems and limitations, however. For example,“moonshots” conjures up thoughts of large, expensive government programs that are centrally-directed in a top-down fashion. Writing in The New Atlantis last year, Mark P. Mills argued that the notion of “ technological miracles ” can be taken to unrealistic extremes and he specifically cautioned against getting caught up in “moonshot fallacies” as well as “Moore’s Law fallacy.”

The “moonshot fallacy” is commonly heard in policy discussions whenever a policymaker or pundit insists that, “If we can put a man on the moon, then we can…” fill in the blank with your prefered aspirational goal du jour . But as Mills points out, this sort of talk often represents highly unrealistic, wishful thinking. “It is true that engineers have achieved amazing feats when tasked with particular, practical goals. But not all goals are equally achievable,” he correctly argues.  

“Moore’s Law fallacy” refers to the fact that innovation in the physical world of atoms is usually much harder and more costly than innovation in the digital world of bits. “If energy technology had followed a Moore’s Law trajectory, today’s car engine would have shrunk to the size of an ant while producing a thousandfold more horsepower,” Mills observes. The time horizons for big change are almost always going to be significantly longer in the physical world even with the increasing digitization in society and “ software eating the world .”

“Disruptive technology” is also a problematic term because its common use is quite different from Clayton M. Christensen’s original explanation of the term in his widely-cited Harvard Business Review articles from 1995 and then 2015 . “The original notion of disruption aimed to describe why great firms can fail,” Josh Gans explained in his recent book, The Disruption Dilemma . “Today, use of the term has gotten out of control,” he says. “As a concept, disruption has become so persuasive this it is at risk of becoming useless.”

Gans makes a good point. Not everything can be disruptive. Moreover, some techno-evangelists get carried away with such rhetoric regarding the “disruptive,” “transformative,” and “miracle”-working” potential of various technologies.  

But Sometimes Dreams Come True

Despite these definitional controversies or rhetorical excesses from some overly-exuberant tech boosters, these terms retain real meaning and significance.  

It is easy to ridicule dreamers, but quite a bit of life-changing innovation begins as a dream of some sort. Without a doubt, a great many “moonshots” will never get off the ground, and many “deep” technologies will end up sinking into the ocean of irrelevant or failed technologies. But that’s OK! It is in the process of risk-taking, experimentation, and failure that wisdom is generated and meaningful improvements in social and economic well-being come about.

It’s easy to talk about “trial-and-error” without thinking much about the “error” part of the process. It is only through constant experimentation and failure that we learn how to do things more efficiently and create or improve goods and services.

Perhaps the most straightforward definition of “technology” is Ian Barbour’s: “the application of organized knowledge to practical tasks by ordered systems of people and machines.” But organized knowledge requires lots of trials and lots of errors–by both people and machines–in order to find workable solutions to the tasks we hope to accomplish.

To the extent that we would like to see more technological improvements, we need more “dreamers” who hope to change the world. Entrepreneurs are the key to this process because, by their very nature, they refuse to settle for the status quo. They dream of a world that can work differently; one in which they can improve their own lot and (whether intentionally or not) improve the lot of humanity simultaneously. “What entrepreneurs do,” venture capitalist Vinod Khosla argues , “is they imagine what feels impossible to most people, and take it all the way from impossible, to improbable, to possible but unlikely, to plausible, to probable, to real!”  

That is why entrepreneurialism is so important , and it is also why shouldn’t roll our eyes when people dream about “moonshots” and the ways in which “deep technology” might “disrupt” and “transform” society for the better.  

While we should always keep both feet firmly rooted on the ground, there is nothing wrong with looking skyward and dreaming of a better future. Indeed, as a society, we should seek to foster a culture of innovation that rewards entrepreneurial dreaming and daring, because in seeking to make the world a better place, progress and prosperity become reality.  

Additional Reading

Donald J. Boudreaux, “What’s Your Moonshot?” Mercatus Center at George Mason University, Mercatus Original Video , November 16, 2017, https://www.mercatus.org/videos/whats-your-moonshot .

Joseph L. Bower & Clayton M. Christensen, “Disruptive Technologies: Catching the Wave,” Harvard Business Review , January-February 1995,   https://hbr.org/1995/01/disruptive-technologies-catching-the-wave .

Clayton M. Christensen, Michael E. Raynor & Rory McDonald, “What Is Disruptive Innovation?”  Harvard Business Review,December 2015, https://hbr.org/2015/12/what-is-disruptive-innovation.

Tyler Cowen, “Is Innovation Over? The Case against Pessimism,” Foreign Affairs , March/April 2016, https://www.foreignaffairs.com/reviews/review-essay/2016-02-15/innovation-over .

Swati Chaturvedi, “So What Exactly is ‘Deep Technology’?” LinkedIn , July 28, 2015, https://www.linkedin.com/pulse/so-what-exactly-deep-technology-swati-chaturvedi .

Mike Cushing, “Moonshot Projects – Innovation or Wishful Thinking?” Enterprise Innovation , http://www.enterpriseinnovation.com/articles/moonshot-projects-innovation-or-wishful-thinking .

Vinod Khosla, “We Need Large Innovations,” Medium , January 1, 2018, https://medium.com/@vkhosla/we-need-large-innovations-58e3eaaf8138 .

Josh Gans, The Disruption Dilemma (MIT Press, 2016), https://mitpress.mit.edu/books/disruption-dilemma .

Mark P. Mills, “Making Technological Miracles,” The New Atlantis , (Spring 2017): 37-55, http://www.thenewatlantis.com/publications/making-technological-miracles .

Albert H. Segars, “Seven Technologies Remaking the World,” MIT Sloan Management Review, March 9, 2018, https://sloanreview.mit.edu/projects/seven-technologies-remaking-the-world .  

Adam Thierer, Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom , (Mercatus Center at George Mason University, 2016),   https://www.mercatus.org/publication/permissionless-innovation-continuing-case-comprehensive-technological-freedom

Adam Thierer and Trace Mitchell, “The Many Forms of Entrepreneurialism,” The Bridge , August 30, 2018, https://www.mercatus.org/bridge/commentary/many-forms-entrepreneurialism  

Adam Thierer, “Making the World Safe for More Moonshots,” The Bridge , February 5, 2018, https://www.mercatus.org/bridge/commentary/making-world-safe-more-moonshots

World Economic Forum , Deep Shift: Technology Tipping Points and Societal Impact (Geneva, Switzerland: September 2015), 3, http://www3.weforum.org/docs/WEF_GAC15_Technological_Tipping_Points_report_2015.pdf .

Claire Cain Miller of The New York Times posted an interesting story yesterday noting how, “Technology Has Made Life Different, but Not Necessarily More Stressful.” Her essay builds on a new study by researchers at the Pew Research Center and Rutgers University on “Social Media and the Cost of Caring.” Miller’s essay and this new Pew/Rutgers study indirectly make a point that I am always discussing in my own work, but that is often ignored or downplayed by many technological critics, namely: We humans have repeatedly proven quite good at adapting to technological change, even when it entails some heartburn along the way.

The major takeaway of the Pew/Rutgers study was that, “social media users are not any more likely to feel stress than others, but there is a subgroup of social media users who are more aware of stressful events in their friends’ lives and this subgroup of social media users does feel more stress.” Commenting on the study, Miller of the Times notes:

Fear of technology is nothing new. Telephones, watches and televisions were similarly believed to interrupt people’s lives and pressure them to be more productive. In some ways they did, but the benefits offset the stressors. New technology is making our lives different, but not necessarily more stressful than they would have been otherwise. “It’s yet another example of how we overestimate the effect these technologies are having in our lives,” said Keith Hampton, a sociologist at Rutgers and an author of the study.  . . .  Just as the telephone made it easier to maintain in-person relationships but neither replaced nor ruined them, this recent research suggests that digital technology can become a tool to augment the relationships humans already have.

I found this of great interest because I have written about how humans assimilate new technologies into their lives and become more resilient in the process as they learn various coping techniques. I elaborated on these issues in a lengthy essay last summer entitled,  “Muddling Through: How We Learn to Cope with Technological Change.” I borrowed the term “muddling through” from Joel Garreau’s terrific 2005 book, Radical Evolution: The Promise and Peril of Enhancing Our Minds, Our Bodies — and What It Means to Be Human.  Garreau argued that history can be viewed “as a remarkably effective paean to the power of humans to muddle through extraordinary circumstances.”

Garreau associated this with what he called the “Prevail” scenario and he contrasted it with the “Heaven” scenario, which believes that technology drives history relentlessly, and in almost every way for the better, and the “Hell” scenario, which always worries that “technology is used for extreme evil, threatening humanity with extinction.” Under the “Prevail” scenario, Garreau argued, “humans shape and adapt [technology] in entirely new directions.” (p. 95) “Just because the problems are increasing doesn’t mean solutions might not also be increasing to match them,” he concluded. (p. 154) Or, as John Seely Brown and Paul Duguid noted in their excellent 2001, “Response to Bill Joy and the Doom-and-Gloom Technofuturists”:

technological and social systems shape each other. The same is true on a larger scale. […] Technology and society are constantly forming and reforming new dynamic equilibriums with far-reaching implications. The challenge for futurology (and for all of us) is to see beyond the hype and past the over-simplifications to the full import of these new sociotechnical formations.  Social and technological systems do not develop independently; the two evolve together in complex feedback loops, wherein each drives, restrains and accelerates change in the other.

In my essay last summer, I sketched out the reasons why I think this “prevail” or “muddling through” scenario offers the best explanation for how we learn to cope with technological disruption and prosper in the process. Again, it comes down to the fact that people and institutions learned to cope with technological change and become more resilient over time. It’s a learning process, and we humans are good at rolling with the punches and finding new baselines along the way. While “muddling through” can sometimes be quite difficult and messy, we adjust to most of the new technological realities we face and, over time, find constructive solutions to the really hard problems.

So, while it’s always good to reflect on the challenges of life in an age of never-ending, rapid-fire technological change, there’s almost never cause for panic. Read my old essay for more discussion on why I remain so optimistic about the human condition.

Good to see so many media industry executives expressing skepticism about the idea of government subsidies for the press. Danny Glover brought to my attention this new survey by the Pew Research Center’s Project for Excellence in Journalism in association with the American Society of News Editors (ASNE) and the Radio Television Digital News Association (RTDNA). It revealed that, “Fully 75% of all news executives surveyed—and 88% of newspaper executives—said they had ‘serious reservations,’ or the highest level of concern, about direct subsidies from the government.” A smaller percentage (only 46%) had serious reservations about tax credits for news organizations, then again, only 13% said they “would welcome such funding” and just 6% said they were “enthusiastic” about it.

This is encouraging news as many government officials at the FCC, FTC, and in Congress are currently considering whether government should steps to prop up failing media entities or promote certainly types of content. Berin Szoka and I have been working on a series of essays about the wrong ways to go about reinventing media [see Part 1, Part 2] and plan several more installments leading up to a big filing in the FCC’s “Future of Media” proceeding (the deadline is May 7^th).

Here’s a chart from the Pew survey illustrating funding alternatives and the percentage who had “serious reservations” about each option:

by Adam Thierer & Berin Szoka, Progress Snaphot 6.1

Stephanie Clifford of the  New York Times posted a very interesting article this week summarizing a recent “on-the-record chat” the Times staff had with Federal Trade Commission (FTC) chairman Jon Leibowitz and FTC Bureau of Consumer Protection chief David Vladeck.  The interview [discussed by Braden here] is profoundly important in that it reveals an alarming disconnect regarding the relationship between “privacy” regulation and the future of media, which were the subjects of their discussion with Times staff.  Namely, Leibowitz and Vladeck apparently fail to appreciate how the delicate balance between commercial advertising and journalism is at risk precisely because of the sort of regulations they apparently are ready to adopt.  Because the value of online advertising depends on data about its effectiveness and consumers’ likely interests, and because advertising is indispensable to funding media, what’s ultimately at stake here is nothing short of the future of press freedom.

The “Day of Reckoning” Is Upon Us

Leibowitz and Vladeck spend the first half of The Times interview wringing their hands about “privacy policies,” the declarations made by websites and advertising networks about their data collection and use practices (for which the FTC can and must hold them accountable).  But the two feel that privacy policies don’t adequately inform consumers.  Chairman Leibowitz claims that online companies “haven’t given consumers effective notice, so they can make effective choices.”  And Mr. Vladeck states that advise-and-consent models “depended on the fiction that people were meaningfully giving consent.” But he and the FTC seem ready to abandon the notice and choice model because the “literature is clear” that few people read privacy policies, Vladeck told the Times.  He and Leibowitz continue:

“Philosophically, we wonder if we’re moving to a post-disclosure era and what that would look like,” Mr. Vladeck said. “What’s the substitute for it?” He said the commission was still looking into the issue, but it hoped to have an answer by June or July, when it plans to publish a report on the subject. Mr. Leibowitz gave a hint as to what might be included: “I have a sense, and it’s still amorphous, that we might head toward opt-in,” Mr. Leibowitz said.

This clearly foreshadows the regulatory endgame we have long suspected was coming.  When the FTC released its “Self-Regulatory Principles for Online Behavioral Advertising” eleven months ago, we asked: “What’s the Harm & Where Are We Heading?”  Their answers to both questions have become clearer with each new calculated comment—all apparently intended to slowly “turn up the heat” on the advertising industry so that the proverbial frog will stay in the pot until the water finally boils.  Leibowitz’s FTC has simply dodged the “harm” question with a four-part strategy:

1. Cobble together a “record” full of sympathy-evoking anecdotes submitted by advocates of regulation in comments and the FTC’s ongoing “Exploring Privacy” Roundtables;
2. Let the most extreme Chicken Littles fulminate about the grand conspiracy of “neuromarketing manipulation” and the like (and sometimes even shout down FTC staff in panel discussions) in order to redefine the “reasonable center” of the debate;
3. Define-down “harm” as purely a matter of “consumer expectations” or consumers’ “dignity interests” (whatever that vague and infinitely elastic term means); and
4. Attack the effectiveness of “consent” itself by suggesting that consumers cannot be trusted to understand privacy policies or be expected to make any effort to protect their own privacy.

Conveniently, this strategy leads right back to the “day of reckoning” Chairman Leibowitz threatened was coming last February: We are heading precisely where he told us we would be—to full-on, opt-in regulation.  The writing on the wall becomes more apparent every day: Leibowitz set out to bring online advertising to heel even before becoming Chairman, and his Commission is reprising almost precisely the same approach that led to the passage of the Children’s Online Privacy Protection Act (COPPA) of 1998: building a case for new authority, dismissing industry self-regulation as ineffective, and finally presenting a report to Congress intended to produce a rapid legislative response.  After the FTC presented its report on the need for regulation in congressional testimony in June 1998, it took Congress just four months to pass COPPA—and much of that time was consumed by the summer recess.  In short, Leibowitz is mounting a carefully choreographed campaign for increased regulation.

The only real question is whether Leibowitz will somehow try to use the FTC’s existing authority over “unfair or deceptive” trade practices or wait for expanded authority from Congress.  While most observers typically assume that such expanded authority would come in the form of a privacy-specific bill—be it a broad “baseline” privacy bill or one specifically focused on online data collection for advertising purposes—the authority Leibowitz yearns for could just as easily come in the form of increased rulemaking authority as part of a broader bill that allows the FTC to preemptively regulate practices that are not deceptive but merely deemed “unfair.”

This would take the agency “ Back to the Future”—to the late 1970s, when the agency reached the height of its efforts to regulate purely on “unfairness” grounds by trying to ban advertising to children.  The agency’s behavior earned it the moniker “National Nanny” from the Washington Post, hardly a bastion of regulatory skepticism.[1] That outpouring of popular resentment caused a heavily Democratic Congress to cut-off the Democratic-led agency’s regular funding and prohibit it from regulating advertising merely on the grounds of “unfairness.”  In essence, they told the agency to “go back to its knitting” and focus on protecting consumers from demonstrated harms.^[2] Duly chastened (and actually shut down for several days), the FTC formulated a meaningful legal standard for “unfairness,” which Congress codified in 1994: for a practice to be unfair, the injury it causes must be (1) substantial, (2) without offsetting benefits, and (3) one that consumers cannot reasonably avoid.

Under this statutory standard, as FTC Commissioner Thomas Rosch has argued, the commission must carefully consider:

[the] legitimate pro-consumer and pro-competitive benefits that result from [targeted advertising]. Absent hard data weighing these benefits against the limited “invasion of privacy interests” involved, it would seem difficult to conclude that treating that practice as an actionable violation of the “unfairness” prong of Section 5 will pass muster.[3]

So Leibowitz and Vladeck either need to get serious about weighing the costs and benefits of targeted advertising—or, in the absence of such actually measuring these trade-offs, get Congress to give them the authority to regulate.  But one thing is clear from their past statements: they are in a hurry to do  something. As Vladeck told The Times last August, “There is a sense of urgency around here… Consumers, I don’t think are sufficiently protected under the current regime.”  Apparently, the case is closed in their minds.

“Left Hand, Meet Right Hand”

The second half of the  Times interview concerns the future of news. Chairman Leibowitz is not optimistic:

“There are some areas where you clearly see positive creative destruction,” Mr. Leibowitz said, giving the example of travel agents who were replaced by Orbitz and other online-booking systems. The news, he said, was not one of those. “When you’re dealing with something as critical as news is to a democracy, you need to ensure, certainly, that it’s independent, but also that it’s vibrant going forward,” he said. Areas like investigative reporting, foreign and domestic bureaus, and state-house reporting, he said, would likely falter under blog operations because of “economies of scale.”

He said he wasn’t sure what the solution was, but threw out a few ideas discussed at the conference: maybe special tax treatment for newspapers, a Corporation for Public Broadcasting-like fund, or for the newspaper industry to charge fees for the re-use of its content, similar to the model that the American Society of Composers, Authors and Publishers uses. [emphasis added]

Mr. Chairman, with all due respect, haven’t you forgotten about the solution that has powered private media for a few centuries in this country?  You know— advertising!  Indeed, what’s stunning about these comments is the complete disconnect with what Leibowitz and Vladeck said earlier in the interview.  It certainly may be the case that they said more on the subject than what The Times has reported, but given their escalating rhetoric, it seems likely that significantly increased FTC regulation is on the horizon.  And, yet, as Chairman Leibowitz marches us into this brave new world of regulating Internet media through their key funding source, he and Mr. Vladeck seem to have little appreciation of the vital role played by advertising in sustaining a truly free and vibrant press.

An Attack on Advertising Is an Attack on Media Itself

Let’s step back and revisit Media Economics 101.  Almost every serious scholar in the field acknowledges this truism: Advertising cross-subsidizes media platforms and the creation of valuable information—especially news.  “Advertising is the mother’s milk of all the mass media,”  Wall Street Journal technology columnist Walt Mossberg has noted.  Similarly, Harold L. Vogel, author of Entertainment Industry Economics, the leading text in the field, has noted, “Advertising is the key common ingredient in the tactics and strategies of all entertainment and media company business models.  Indeed, it might further be said that advertising has substantively subsidized the production and delivery of news and entertainment throughout the last century.”[4] Mossberg agrees and notes, “Without ads, most editorial products and other programming would be either unavailable or prohibitively expensive.”

The reason for the indispensability of advertising is simple: Information (including news and other forms of “content”) has “public good” characteristics that make it is very difficult (and occasionally impossible) for information-publishers to recoup their investments.  Simply put, they quite literally lack pricing power: Whatever they charge, someone else will charge less for a close substitute, inevitably leading to “free” distribution of the content, even though the content is anything but free to produce.  Advertising is the one business model that has traditionally saved the day by rewarding publishers for attracting the attention of an audience.

Which raises another under-appreciated point: Private advertising promotes press independence.  “Newspapers, magazines, radio, television, and many websites all receive their primary income from advertising,” notes William F. Arens, author of  Contemporary Advertising, another leading textbook in the field. “This facilitates freedom of the press and promotes more complete information” he concludes.[5] Why?  Because, contrary to what some critics claim, advertising and marketing help keep private media providers independent of the need for taxpayer subsidies or private patrons.  This begs an even more profound question: If not advertising, then what else?

A “Public Option” for the Press?

What’s most troubling about Chairman Leibowitz’s comments to the Times is that he has apparently found his alternative to advertising: a “public option” for the press! He mentions special tax treatment for newspapers or a new CPB-like fund (don’t we already have one?) as two possibilities.  That certainly will be music to the ears of radical, pro-regulatory activist groups like the ironically-named “Free Press,” which wants to see a massive “public works” program for the media sector.

Free Press recently filed comments with the FTC in the agency’s recent workshop, “Can Journalism Survive the Internet Age?” and proposed a far-reaching industrial policy for “saving the news.”  They call for over $50 billion in subsidies for the Corporation for Public Broadcasting and other bureaucracies, a “journalism jobs program” for that would be part of AmeriCorps, a variety of new tax incentives for struggling media operations or individuals who support favored institutions, and an assortment of government incentives to encourage local ownership and media divestiture (by handing over control to smaller operators or minority-owned groups).  Ironically, “Free Press” has also floated the concept of “a small tax on advertising” as one way to pay for a press bailout.

The organization’s founder Robert W. McChesney, the prolific neo-Marxist media scholar, penned an essay with John Nichols of The Nation last year, claiming that saving journalism essentially requires that media become an appendage of the State.  Although advertising has supported journalism as a “public good” for centuries, the only way they can conceive to provide a public good is to socialize its means of production.  Thus, journalism, like education and national defense, requires constant government oversight and support: “A moment has arrived at which we must recognize the need to invest tax dollars to create and maintain news gathering, reporting and writing with the purpose of informing all our citizens.”  They ask us to consider the $60 billion in government spending they propose as a “free press ‘infrastructure project,’” which would “keep the press system alive.”

Some in Congress seem willing to listen.  The Senate has already held hearings about the future of journalism.  And Senator Benjamin L. Cardin (D-MD) recently introduced what he has called the “Newspaper Revitalization Act,” which would allow newspapers to become nonprofit organizations in an effort to help them stay afloat.  Importantly, however, the bill would also disallow political endorsements on newspaper editorial pages—which, like campaign finance restrictions, would be a boon for incumbent politicians.  That bill should serve as fair warning to journalists about the sort of strings lawmakers will attach to press-welfare efforts going forward.  What other “golden shackles” might come with media subsidies?

To be clear, Chairman Leibowitz hasn’t called for a complete press takeover along the lines of the Free Press plan.  Yet, he hasn’t answered a key question in this debate: Who pays for news?  He appears ready to endorse a bold new regulatory scheme for the Internet and online media that, in the name of “protecting privacy” would put at risk the one traditionally successful method of supporting private media operations—advertising.  As the Pew Research Center’s Project for Excellence in Journalism noted in its latest State of the News Media report, “The problem facing American journalism is not fundamentally an audience problem or a credibility problem.  It is a revenue problem—the decoupling… of advertising from news.”  There’s probably no way policymakers can stop this process, nor should they try.  But they shouldn’t be creating new obstacles to the survival of traditional media creators, either.

Unfortunately, that’s exactly what Chairman Leibowitz’s new regulatory scheme would do.  The revenue “delta” between “smart” advertising (tailored to consumers’ likely interests and measured for effectiveness in producing clicks, purchases, etc.) and “dumb advertising” (based purely on surrounding keywords or demographics of users presumed to visit the site) is difficult to measure but potentially enormous—even 10 times as great for some sites.[6] The difference between opt-in and opt-out could be nearly as dramatic, because it’s difficult to get consumers to opt-in for anything, especially for small players—which means that opt-in regulation could, perversely, force consolidation in the online advertising and content markets.  If the FTC cares about its statutory responsibility to safeguard competition, they should take this dynamic seriously and be hyper-cautious about heavy-handed mandates that could derail smarter advertising.

Finally, to be fair, in his interview, the Chairman also suggests the newspaper industry might want to find new way “to charge fees for the re-use of its content.”  We’re certainly not opposed to the notion and think that, if it could somehow be made to work (especially by removing antitrust obstacles), it could part of a diverse revenue mix for digital journalism.  But, there’s the rub.  Micropayments inevitably face the problem of “mental transaction costs”  that likely swamp the perceived value of most content and, like pay-walls, have generally worked only in media environments characterized by a scarcity of providers and a uniqueness of a sufficiently valuable product.  These cold, hard economic realities are why advertising remains indispensable.

The Principled Alternative to Regulation

Convinced that privacy policies simply don’t work, Leibowitz and Vladeck are asking what a “post-disclosure era” would look like.  We appreciate the continued sensitivities expressed by certain groups and individuals about online privacy and data use more generally.  But there is another way forward.  We have proposed the following “5-E” layered approach to concerns about online privacy, focusing on restraining government access to data as a clear harm, rather than crippling the private sector uses of data that directly benefit consumers:

1. Erect a higher “Wall of Separation between Web and State” by increasing Americans’ protection from government access to their personal data—thus bringing the Fourth Amendment into the Digital Age.
2. Educate users about privacy risks and data management in general as well as specific practices and policies for safer computing.
3. Empower users to implement their privacy preferences in specific contexts as easily as possible.
4. Enhance self-regulation by industry sectors and companies to integrate with user education and empowerment.
5. Enforce existing laws against unfair and deceptive trade practices as well as state privacy tort laws.

Such a layered approach would not only be a “less restrictive” alternative to top-down, one-size-fits-all government regulation, but also potentially more effective in key respects than government data use/collection mandates.  In an ideal world, adults would be fully empowered to tailor privacy decisions, like speech decisions, to their own values and preferences (“household standards”).  Consumers would have (1) the information necessary to make informed decisions and (2) the tools and methods necessary to act upon that information. Importantly, those tools and methods would give them the ability to block the things they don’t like—annoying ads or the collection of data about them, as well as objectionable content—while also helping them find the information and content they desire.

But of course, the devil’s in the details.  Leibowitz and Vladeck would set the bar so high as to what constitutes “effective” consumer choice that current privacy policies necessarily fail their test—if only because most users don’t care enough to make the “right” privacy choices.  Privacy policies, even if read by relatively few consumers, nonetheless allow privacy advocates, journalists and watchdog-bloggers to scrutinize what companies say they’re doing—promises to which the FTC should hold companies stringently.  That’s clearly not good enough for Leibowitz and Vladeck, who want to give up on “notice and choice” and move on to “opt-in” mandates.  But why not first try to make “notice” more effective?  The advertising industry is currently developing standardized interfaces that could communicate key information about privacy practices in a single icon, label or other easily-digested “consumer touch point.”

More radically, why focus on tinkering with consumer interfaces, when standardized data disclosure formats like the Protocol for Privacy Preferences (P3P) could distill legalistic privacy policies into “machine-readable” code?  Such disclosures could provide a powerful form of “notice” that the ordinary consumer could “use”: simply setting their own privacy preferences in a browser tool that automatically implements those preferences by blocking tracking that users object to.  Such a privacy disclosure format could also allow the FTC to automate enforcement of its existing authority to punish unfair or deceptive trade practices.

Conclusion

And so we return to the question the FTC asked in its recent workshop, “Can Journalism Survive the Internet Age?”  Answer: Not if the FTC kills the golden goose that lays the golden eggs through onerous advertising regulations and data controls in the name of “privacy.”  Chairman Leibowitz and Bureau Chief Vladeck shouldn’t foreclose the possibility that advertising can play a central role in the future of a free press in the Digital Age—just as it has done historically in the United States.  Indeed, they would be wise to remember that advertising has always been with us.  As the Supreme Court noted in its 1996 decision, 44 Liquormart, Inc. v. Rhode Island.

Advertising has been a part of our culture throughout our history. Even in colonial days, the public relied on “commercial speech” for vital information about the market. Early newspapers displayed advertisements for goods and services on their front pages, and town criers called out prices in public squares. Indeed, commercial messages played such a central role in public life prior to the founding that Benjamin Franklin authored his early defense of a free press in support of his decision to print, of all things, an advertisement for voyages to Barbados.[7]

Of course, for advertising to continue to play the role as sustainer of the press, it must be allowed to evolve.  Media operators—large and small alike—must be allowed to craft new strategies, some of which may require data collection and marketing practices that will make some privacy-sensitive users uncomfortable, but will also ensure that the goose keeps on laying golden eggs for them and everyone else.

While Chairman Leibowitz may decry the creative destruction at work in the news sector and information industries today, that shakeup will continue and, no doubt, be painful for incumbent players.  Advertising alone may not “save the day” for media as it has in the past, but it will likely remain essential to sustaining private media platforms and providers going forward— if federal policymakers allow it.  The alternative—massive government intervention into the news and media sectors—is too horrifying to think about.

[1] Washington Post, March 1, 1978.

[2] Congress terminated the FTC’s efforts to prohibit advertising to children, and barred the agency from issuing any advertising regulation predicated solely on unfairness for three years.  FTC Improvements Act, Pub. L. No. 96-252, § 11 (May 1980).  See generally J. Howard Beales, Director of the Bureau of Consumer Protection, Federal Trade Commission, The FTC’s Use of Unfairness Authority: Its Rise, Fall, and Resurrection, www.ftc.gov/speeches/beales/unfair0603.shtm.

[3] Thomas Rosch, Some Reflections on the Future of the Internet: Net Neutrality, Online Behavioral Advertising, and Health Information Technology, Remarks at U.S. Chamber of Commerce Telecommunications & E-Commerce Committee Fall Meeting, October 26, 2009, 13, www.ftc.gov/speeches/rosch/091026chamber.pdf.

[4] Harold L. Vogel, Entertainment Industry Economics (Cambridge, MA: Cambridge University Press, 7th Edition, 2007), at 46.

[5] William F. Arens, Contemporary Advertising (McGraw-Hill Irwin, 10^th Ed., 2006) at 50.

[6] See Berin Szoka & Mark Adams, The Benefits of Online Advertising & Costs of Privacy Regulation, PFF Working Paper, Nov. 8, 2009, www.scribd.com/doc/22445754/Benefits-of-Online-Advertising-Paper.

[7] 517 U.S. 484, 495 (1996), http://www.law.cornell.edu/supct/html/94-1140.ZO.html

______________________________

Related PFF Publications

• Privacy Trade-Offs: How Further Regulation Could Diminish Consumer Choice, Raise Prices, Quash Digital Innovation & Curtail Free Speech, Berin Szoka, Comments to the Federal Trade Commission “Exploring Privacy” Roundtable, November 10, 2009.
• Online Advertising & User Privacy: Principles to Guide the Debate, Berin Szoka & Adam Thierer, Progress Snapshot 4.19, Sept. 2008.
• Targeted Online Advertising: What’s the Harm & Where Are We Heading?, Berin Szoka & Adam Thierer, Progress on Point 16.2, April 2009.
• Privacy Polls v. Real-World Trade-Offs, Berin Szoka, Progress Snapshot 5.10, Oct. 2009.
• The Benefits of Online Advertising & Costs of Privacy Regulation, Berin Szoka & Mark Adams, PFF Working Paper, Nov. 8, 2009.
• Benefits of Online Advertising, Berin Szoka, Mark Adams, Howard Beales, Thomas Lenard & Jules Polonetsky, PFF Capitol Briefing, July 2009.
• Public Option for Press Should Get the Red Pen, Adam Thierer, The Daily Caller, Jan. 12, 2010.

I’ve spent a lot of time in recent years trying to debunk various myths about online child safety or at least put those risks into perspective. Too often, press reports and public policy initiatives are being driven by myths, irrational fears, or unjustified “moral panics.”  Luckily, the New York Times reports that there’s another study out this week that helps us see things in a more level-headed light. This new MacArthur Foundation report is entitled Living and Learning with New Media: Summary of Findings from the Digital Youth Project. This white paper is a summary of three years of research on kids’ informal learning with digital media. The survey incorporates the insights from 800 youth and young adults and over 5000 hours of online observations. The information will eventually be contained in a book from MIT Press (“Hanging Out, Messing Around, Geeking Out: Living and Learning with New Media.”)

From the summary of the study on the MacArthur website:

“It might surprise parents to learn that it is not a waste of time for their teens to hang out online,” said Mizuko Ito, University of California, Irvine researcher and the report’s lead author. “There are myths about kids spending time online – that it is dangerous or making them lazy. But we found that spending time online is essential for young people to pick up the social and technical skills they need to be competent citizens in the digital age.”

Importantly, regarding the concerns many parents and policymakers have about online predation, Ms. Ito told the New York Times that, “Those concerns about predators and stranger danger have been overblown.” “There’s been some confusion about what kids are actually doing online. Mostly, they’re socializing with their friends, people they’ve met at school or camp or sports.”

In the report, according to the summary, the researchers “identified two distinctive categories of teen engagement with digital media: friendship-driven and interest-driven. While friendship-driven participation centered on “hanging out” with existing friends, interest-driven participation involved accessing online information and communities that may not be present in the local peer group.” The specific findings of the study are as follows:

• There is a generation gap in how youth and adults view the value of online activity.
  • Adults tend to be in the dark about what youth are doing online, and often view online activity as risky or an unproductive distraction.
  • Youth understand the social value of online activity and are generally highly motivated to participate.
• Youth are navigating complex social and technical worlds by participating online.
  • Young people are learning basic social and technical skills that they need to fully participate in contemporary society.
  • The social worlds that youth are negotiating have new kinds of dynamics, as online socializing is permanent, public, involves managing elaborate networks of friends and acquaintances, and is always on.
• Young people are motivated to learn from their peers online.
  • The Internet provides new kinds of public spaces for youth to interact and receive feedback from one another.
  • Young people respect each other’s authority online and are more motivated to learn from each other than from adults.
• Most youth are not taking full advantage of the learning opportunities of the Internet.
  • Most youth use the Internet socially, but other learning opportunities exist.
  • Youth can connect with people in different locations and of different ages who share their interests, making it possible to pursue interests that might not be popular or valued with their local peer groups.
  • “Geeked-out” learning opportunities are abundant – subjects like astronomy, creative writing, and foreign languages.

These findings are consistent with the much of the existing research already out there about online youth behavior and Internet interactions. As I have mentioned here before, over the past year, I have been serving on the Internet Safety Technical Task Force (ISTTF), which was formed following a January 2008 agreement between social networking website operator MySpace.com and 49 state Attorneys General. As part their “Joint Statement on Key Principles of Social Networking Safety,” MySpace promised the AGs it would expand online safety tools, improve education efforts, and expand its cooperation with law enforcement. Importantly, they also agreed to create the ISTTF to study online safety issues and technologies.

The Berkman Center for Internet & Society at Harvard Law School was tapped to run the ISTTF, and the Task Force included a wide diversity of child safety groups, non-profit organization, and Internet companies. During a session the Task Force held in Washington, DC on April 30th, we heard from several of the nation’s top researchers in the field of online child safety. The presentations were quite enlightening and the videos of the sessions — as well as supporting materials — have all been posted on a special Berkman Center website. I just wanted to share all of those links with you here so that you have access to these wonderful materials. As you will see, they tell the same story the new MacArthur report does: Almost everything the press and policymakers have told us about online child actions and safety has been wrong.

Anyway, read (or watch) for yourself and decide. (P.S. When the final ISTTF report comes out later this year, it will include a massive compendium of all the relevant surveys and academic research done in this field. It will be the definitive treatment of the issue. An early draft is online here. I will post the final link here once the Task Force wraps up.)

April 30, 2008 – ISTTF Child Online Safety Expert Panel

• Teens OnlineStranger Contact and Cyberbullying: What research is telling us Amanda Lenhart, Pew Internet & American Life Project Presentation in .pdf video
• Youth & Law Enforcement Surveys Janis Wolak, Crimes against Children Research Center Presentation in .pdf video
• Social networking sites, unwanted sexual solicitation, Internet harassment, and cyberbullying Michele Ybarra, Internet Solutions for Kids, Inc. Presentation in .pdf video
• Panel Q&A video
• Further reading
  • 1 in 7 Youth: The Statistics about Online Sexual Solicitations
  • Online “Predators” and Their Victims: Myths, Realities, and Implications for Prevention and Treatment
  • Internet Safety Education for Teens: Getting It Right
  • Internet Prevention Messages: Targeting the Right Online Behaviors
  • Teens, Stranger Contact & Cyberbullying
  • How Risky Are Social Networking Sites?
  • Updated Trends in Child Maltreatment, 2006

So I was just finishing up this excellent new Pew report on “Teens, Video Games and Civics,” and was about to post some thoughts about it when I saw in my RSS feed that the brilliant Henry Jenkins had beat me to it in an essay entitled “Video Game Myths Revisited.” Prof. Jenkins summarizes the major findings of the Pew report as follows (note: He elaborates on each finding in his essay):

• At the most basic level, game playing has become more or less universal.
• The Pew research may also force us to rethink once again the assumption that there is a gender gap in terms of who plays games.
• The Pew Data complicates easy generalizations about the place of violent entertainment in the lives of American teens.
• The Pew Data further challenges the idea that game playing is a socially isolating activity.
• The Pew Research does indicate some areas where parents should be concerned about the gaming lives of their sons and daughters.
• The Pew Research also challenges the prevailing myth that most parents are worried or alarmed about their young people’s relations to games.

Anyway, make sure to read Henry’s write-up and the entire Pew report.  Good stuff.  [And here’s the point where I once again shamelessly plug my old paper on video game myths and some of my other essays like “Dear Gov. Patterson… Regarding that Video Game Bill You Are About to Sign,” “Understanding The True Cost of Video Game Censorship Efforts,” “Do video games create cop killers?” and “Why hasn’t violent media turned us into a nation of killers?”]