TOC Cash on demand Your Turn

June 22, 2010

"Who does have cash?" John Gapper asks rhetorically. This is a very good starting point. "Large dividend-paying companies such as BP", he adds in his essay on President Obama's brand of populism (*). This answer actually reveals more by what it does not say.

John Gapper is too close to his subject and shares in his limitations. On the other hand Edward Luce's comment, "Mr Obama has been responding to the politics, rather than shaping it", lacks empathy (**). Events happen. Twenty tourists turn terrorists (1), a big bank goes bust, an oil well leaks. What can a president do but react?

Indeed when a man in power wants to improve on his environment, he may find he has less power than the public assumes. Reporting on another victory for pronaocracy, Carl Hulse highlights the difficulty President Obama has had on fulfilling his promise to "diminish the power of lobbyists and interest groups" (***). I wish he could but, as suggested by Lawrence Lessig, this may well have to wait for an amendment to the US Constitution.

Presidents may be forced to react and too weak to enact but commentators have the luxury of a longer view. It is not only ironical. It is downright frightening how the BP disaster turns us back to the Industrial Age when energy was king. Aren't we supposed to be in the Information Age?

Google for one would make an excellent target as a cash dispenser, even if its annual profits are only $6.5 billions to BP $17 billions according to Bernard Condon and Michael Liedtke (****). Did John Gapper fail to appreciate that paying dividends is not the only sign of being cash rich?

True Google has not "spilled oil in the gulf, sold cigarettes, made cars what do not brake or constructed synthetic collateralised debt obligations". True again Google will back John Gapper's criteria and declare paying any dividend, let alone put any cash in some government-run escrow fund, would cruelly shortchange its innovation. Intel's shareholders famously waited 24 years for their first dividend. Google is barely 12 years old.

What is lacking then is a rationale for governments to tap Google's money gusher. Only a rationale. The required emotional cover has already been supplied by Google as, unbeknownst to its CEO, some rogue programmer gave extra sweeping power to its Streetview project. This fact has not escaped the attention of the US states. Joseph Menn echoes John Gapper as he recalls that "in the 1990s, co-ordinated lawsuits between states against the big tobacco companies secured advertising reforms and about $200bn in damages" (*****).

Following John Gapper, let us keep a down to earth perspective. Information, entertainment and attention are all that matter to the Information Age, and of these three the last is what matters most. This was the theme of a past column by Stefan Stern which deserves our lasting attention (2).

Paradoxically what Stefan Stern called an "attention economy" prefers to barter rather than monetize attention. In its traditional advertising-supported model, media offer news and entertainment in exchange for consumer attention.

Google's fortune rests on its inherent ability to minimize the adverse feeling of being inopportunely interrupted. Consumers simply get more of the location information they search for as they give their attention to Google ahead of content producers. The latters' loss is Google's gain as consumer attention is in limited supply. It is besides the point of this fillip that art is superior to artifice and that other attention grabbing schemes are possible.

However the same technologies that have enabled our Age have had an unfortunate side effect. They have also fostered a plunder economy whereby consumers pirate information and entertainment from content producers and advertisers increase their consumer attention intake thanks to the systematic pillaging of consumer private information. Google is not the sole culprit, far from it. It just happens to be the biggest.

So, were President Obama eager to regain the initiative, he could declare that, as BP has shown that complacency about security undermines an oil economy, complacency about privacy undermines an attention economy and announce the creation of a national escrow fund to which personal data hogs would be firmly invited to contribute according to personal data rapacity and cash generation capacity.

Reviewing "Barak Obama's address on the gulf oil spill" (******), Christopher Caldwell points out that US Presidents' energy policy is perennially weakened by what he calls an addiction, "not too strong a word for Americans' relationship to oil". Privacy violations do encourage a similar addiction to data but, since its addicts are the advertisers, a principled attempt by President Obama to break the US data addiction should not endanger his popularity with the voters.

Christopher Caldwell further remarks, the President stressed the need "to embark on a ... mission to unleash American innovation". Google may claim it needs all the cash it generates to fund internal innovation, taxing it is not a contradiction. A plunder economy favors the worst kind of innovation, that which facilitates plunder. This is how to interpret Kenneth Li's report on Google' IP portfolio management (*******). "We file patent applications on a variety of ideas [...]. Some of those ideas later mature into real products or services; some don't."

There is today a tremendous need for innovation as sharing promises to create new sources of information by analyzing raw data for hidden patterns. But if a few robber barons are allowed to freely strip mined consumer raw data, they will enjoy a tremendous advantage over potentially more nimble innovators and be content to file patents they may decline to exploit except to prevent competition.

Confidentiality naturally creates problems for those who want to refine raw consumer information. In oil exploration, cutting corners on security surely speeds up drilling and inflates profits. It also depresses the demand for security related innovation. We know the results.

President Obama has a rationale to tap Google's cash, but not before 2013. In a pronaocracy, candidates need data on potential voters for cheap.

Philippe Coueignoux

  • (*) ............. Oil has become the new tobacco, by John Gapper (Financial Times) - June 17, 2010
  • (**) ........... Obama's shift from big hope to geek earns left disdain, by Edward Luce (Financial Times) - June 18, 2010
  • (***) ......... Loopholes Grow In Bill To Offset Campaign Ruling, by Carl Hulse (New York Times) - June 18, 2010
  • (****) ....... For BP, a $20 billion drop in a very large bucket, by Bernard Condon and Michael Liedtke (AP) - June 17, 2010
  • (*****) ..... US states query Google's data collection, by Joseph Menn (Financial Times) - June 18, 2010
  • (******) ... Too high on oil to hear Obama, by Christopher Caldwell (Financial Times) - June 19, 2010
  • (*******) . Google patent clouds digital media horizon, by Kenneth Li (Financial Times) - June 17, 2010
  • (1) 19 really but let's not quibble.
  • (2) Your attention, please, I need you to focus on this now , by Stefan Stern (Financial Times) - January 6, 2009
June 2010
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