Free market for the news? Please.

A free market for news would work about as well as a free market for kidneys. So it’s pretty seriously unhelpful to reach for the invisible hand to solve the news business’s problems, as this FT editorial does.

Of all the defects news possesses, here’s but a short, partial list:

• News is very much an experience good, hobbled by deep information asymmetries.
• News is very much a public good, which means it’s non-excludable and non-rivaled
• News is very much a substitute good.

Goods with characteristics like these are prone to market failures of all kinds. So the FT should probably feel free to exercise a bit more creativity.

A twig in the eye for sure.

Not by Links Alone

At this unthinkably late hour, many of even the most recalcitrant journalists and newsy curmudgeons have given themselves over, painfully, to the fundamentally important fact that the economics of abundance now govern their world.

For many, of course, stemming that tide is still paramount. Their goal, as David Carr writes, is to squelch the “new competition for ads and minds.” Thus Walter Isaacson’s “E-ZPass digital wallet” and Alan Mutter’s “Original Sin.” Thus Michael Moran’s obnoxious “NOPEC.” Thus Journalism Online. And, of course, thus we have David Simon’s recent call for Congress to “consider relaxing certain anti-trust prohibitions” or this call in the Washington Post to rework fair use. I wish them all good luck, but mostly good night.

There are others, though, who think it’s great that the Internet and Google are opening up the news to competition. In fact, “Google is good” strikes me as nearly orthodox among the basically Internet-savvy set of news talkers. Marissa Mayer crows about how Google delivers newspapers’ Web sites one billion clicks a month, and Arianna Huffington insists that the future of news is to be found in a “linked economy” and “search engines” like Google.

In this narrative, Google’s the great leveler, ushering the world of journalism out of the dark, dank ages of monopoly and into the light, bright days of competition, where all news articles and blog posts stand on their own pagerank before the multitude of users who judge with their links and their clicks. Its ablest defender is probably Jeff Jarvis, author of What Would Google Do? Jarvis was relatively early in pointing out that “Google commodifies the world’s content by making it all available on a level playing field in its search.” In that and other posts at Buzz Machine, his widely read blog, Jarvis allows that Google “can make life difficult” but insists, “that’s not Google’s fault.” The reverence for Google is thick: “The smart guys are hiring search-engine optimization experts and trying to figure out how to get more people to their stuff thanks to Google.”

But defenders of Google’s influence on the broader market for news and newspapers themselves make a striking error in believing that the market for content is competitive. That belief is wrong—not just a little bit or on the margin, but fundamentally, and importantly, wrong.

Which is not to say that news publishers aren’t competing for readers’ eyeballs and attention. Publishers compete with one another all day long, every day—with some local exceptions, the news has always been competitive like a race, and is now more competitive like a market than ever before. But the market for that news—the place where consumers decide what to read, paying with their attention—is not competitive. Google may well be the great leveler, but down to how low a field?

To be very clear, this is far from a neo-classical purist’s critique that picks nits by abusing uselessly theoretical definitions. I am not a purist, an economist, or a jerk. This is reality, as best as I know it. Nevertheless, to say that the market for content is competitive is just to misunderstand what a competitive market actually entails. The market for news content as it currently stands, with Google in the middle, is a profoundly blurry, deeply uncompetitive space.

*    *    *

“The difficulty of distinguishing good quality from bad is inherent in the business world,” Nobel laureate George Akerlof wrote in the kicker of his most famous paper, published in 1970. “This may indeed explain many economic institutions and may in fact be one of the more important aspects of uncertainty.”

Akerlof fired an early shot in a scholarly marathon to study the effects of asymmetric information in markets. What do parties to a potential transaction do when they know different sets of facts? Maybe that seems like an obvious question, but economists in the middle of the twentieth century had been pretty busy worrying about perfecting complicated models despite their grossly simplistic assumptions.

So Akerlof set about to write about how markets can fail when some of those assumptions turn out to be bunk. The assumption he tested first, in “The Market for ‘Lemons,'” was certainty, and he showed that when sellers know more about the goods being sold than the buyers do, sellers abuse their privileged position and buyers leave the market.

Writing in the same year, the economist Phillip Nelson studied the differences between what he called “search goods” and “experience goods.” Search goods and experience goods express a certain kind of asymmetry. For search goods, consumers can overcome the asymmetry before the point of purchase by doing their homework, while for experience goods, consumers must take their time and invest.

A pair of pants, for instance, is a search good—you can try before you buy, and shop around for the pants that fit you best. An apple, on the other hand, is an experience good—you don’t know whether you’ll like one until you consume it, and you can’t really try before you buy.

News articles are experience goods. Just as with an apple, you need to consume the story, reading the article or watching the video or so on, in order to judge its quality. “Stories can vary in length, accuracy, style of presentation, and focus,” writes economist James Hamilton in All the News That’s Fit to Sell. “For a given day’s events, widely divergent news products are offered to answer the questions of who, what, where, when, and why.” We can’t know which one’s best till we’ve read them all, and who’s got time for that?

Moreover, a multitude of subjective editorial decisions produce the news. Each reporter’s practices and habits influence what’s news and what’s not. Their learned methods, their assigned beats, and even their inverted pyramids shape what we read and how. Reporters’ and editors’ tastes, their histories, or their cultures matter, as do their professional ethics. Each article of news is a nuanced human document—situated aesthetically, historically, culturally, and ethically.

Ultimately, the news is afflicted with the problem of being an experience good more than even apples are. At least Granny Smiths don’t vary wildly from farmer to farmer or from produce bin to produce bin. Sure, some may be organic, while others are conventional. One may be tarter or crispier than another, but tremendous differences from the mean are very unlikely. With the news, though, it’s hard even to think of what the mean might be. It may seem obvious, but articles, essays, and reports are complex products of complex writerly psychologies.

For a long time, however, as readers, we were unaware of these nuances of production. That was, in some sense, the upshot: our experience of this journalism was relatively uncomplicated. This profound lack of context mattered much less.

Call it the myth of objectivity maybe, but what NYU professor Jay Rosen has labeled the “mask of professional distance” meant that we didn’t have much of a chance to bother with a whole world complexities. Because everyone usually wore a mask, and because everyone’s masked looked about the same, we ignored—indeed, we were largely necessarily ignorant of—all the unique faces.

For a long time, therefore, the orthodox goal of American newspapers virtually everywhere was news that really wasn’t an experience good. When news existed only on paper, it hardly mattered what news was, because we had so few seemingly monochrome choices about what to read. We returned to the same newspapers and reporters behind the same masks over and over again, and through that repetition, we came subtly to understand the meaning and implications of their limited degrees of “length, accuracy, style of presentation, and focus.”

As a result, we often grew to love our newspaper—or to love to hate it. But even if we didn’t like our newspaper, it was ours, and we accepted it, surrendering our affection either way, even begrudgingly. The world of news was just much simpler, a more homogeneous, predictable place—there were fewer thorny questions, fewer observable choices. There was less risk by design. Our news was simpler, or it seemed to be, and we had little choice but to become familiar with it anyhow. One benefit of the View from Nowhere, after all, is that basically everyone adopted it—that it basically became a standard, reducing risk.

But a funny thing happened in this cloistered world. Because it seemed only natural, we didn’t realize the accidental nature of the understanding and affection between readers and their newspapers. If, as the economists would have it, the cost of a thing is what we’ve sacrificed in order to achieve it, then our understanding and affection were free. We gave nothing up for them—for there was scarcely another alternative. As a result, both readers and publishers took those things for granted. This point is important because publishers are still taking those things for granted, assuming that all people of good faith still appreciate and love all the good things that a newspaper puts on offer.

*    *    *

But when our informational options explode, we can plainly, and sometimes painfully, see that our newspapers aren’t everything. Different newspapers are better at answering different questions, and some answers—some as simple as what we should talk about at work tomorrow—don’t come from newspapers at all. So we go hunting on the Internet. So we gather. So we Google.

We have now spent about a decade Googling. We have spent years indulging in information, and they have been wonderful years. We are overawed by our ability to answer questions online. Wikipedia has helped immensely in our efforts to answer those questions, but pagerank elevated even it. Newspapers compose just one kind of Web site to have plunged into the scrum of search engine optimization. Everyone’s hungry for links and clicks.

And Google represents the Internet at large for two reasons. For one, the engine largely structures our experience of the overall vehicle. More importantly, though, Google’s organization of the Internet changes the Internet itself. The Search Engine Marketing Professional Organization estimates, in this PDF report, that North American spending on organic SEO in 2008 was about $1.5 billion. But that number is surely just the tip of the iceberg. Google wields massive power over the shape and structure of the Internet’s general landscape of Web pages, Web applications, and the links among them. Virtually no one builds even a semi-serious Web site without considering whether it will be indexed optimally. For journalism, most of the time, the effects are either irrelevant or benign.

But think about Marissa Mayer’s Senate testimony about the “living story.” Newspaper Web sites, she said, “frequently publish several articles on the same topic, sometimes with identical or closely related content.” Because those similar pages share links from around the Web, neither one has the pagerank that a single one would have. Mayer would have news Web sites structure their content more like Wikipedia: “Consider how the authoritativeness of news articles might grow if an evolving story were published under a permanent, single URL as a living, changing, updating entity.”

Setting aside for the moment whatever merits Mayer’s idea might have, imagine the broader implications. She’s encouraging newspapers to change not just their marketing or distribution strategies but their journalism because Google doesn’t have an algorithm smart enough to determine that they should share the “authoritativeness.”

At Talking Points Memo, Josh Marshall’s style of following a story over a string of blog posts, poking and prodding an issue from multiple angles, publishing those posts in a stream, and letting the story grow incrementally, cumulatively might be disadvantaged because those posts are, naturally, found at different URLs. His posts would compete for pagerank.

And maybe it would be better for journalism if bloggers adopted the “living story” model of reporting. Maybe journalism schools should start teaching it. Or maybe not—maybe there is something important about what the structure of content means for context. The point here isn’t to offer substantive answer to this question, but rather to point out that Mayer seems unaware of the question in the first place. It’s natural that Mayer would think that what’s good for Google is good for Internet users at large. For most domestic Internet users, after all, Google, which serves about two-thirds of all searches, essentially is their homepage for news.

But most news articles, of course, simply aren’t like entries in an encyclopedia. An article of news—in both senses of the term—is substantially deeper than the facts it contains. An article of news, a human document, means substantially more to us than its literal words—or the pageranked bag of words that Google more or less regards it as.

Google can shine no small amount of light on whether we want to read an article of news. And, importantly, Google’s great at telling you when others have found an article of news to be valuable. But the tastes of anonymous crowds—of everyone—are not terribly good at determining whether we want to read some particular article of news, particularly situated, among all the very many alternatives, each particularly situated unto itself.

Maybe it all comes down to a battle between whether Google encourages “hit-and-run” visits or “qualified leads.” I don’t doubt that searchers from Google often stick around after they alight on a page. But I doubt they stick around sufficiently often. In that sense, I think Daniel Tunkelang is precisely correct: “Google’s approach to content aggregation and search encourages people to see news…through a very narrow lens in which it’s hard to tell things apart. The result is ultimately self-fulfilling: it becomes more important to publications to invest in search engine optimization than to create more valuable content.”

*    *    *

The future-of-news doomsayers are so often wrong. A lot of what they said at Kerry’s hearing was wrong. It’s woefully wrongheaded to call Google parasitic simply because it the Internet without it would be a distinctly worse place. There would be, I suspect, seriously fewer net pageviews for news. And so it’s easy to think that they’re wrong about everything—because it seems that they fundamentally misunderstand the Internet.

But they don’t hold a monopoly on misunderstanding. “When Google News lists one of ours stories in a prominent position,” writes Henry Blodget, “we don’t wail and moan about those sleazy thieves at Google. We shout, ‘Yeah, baby,’ and start high-fiving all around.” To Blodget, “Google is advertising our stories for free.”

But life is about alternatives. There’s what is, and there’s what could be. And sometimes what could be is better than what is—sometimes realistically so. So however misguided some news executives may have been or may still be about their paywalls and buyouts, they also sense that Google’s approach to the Web can’t reproduce the important connection the news once had with readers. Google just doesn’t fit layered, subtle, multi-dimensional products—experience goods—like articles of serious journalism. Because news is an experience good, we need really good recommendations about whether we’re going to enjoy it. And the Google-centered link economy just won’t do. It doesn’t add quite enough value. We need to know more about the news before we sink our time into reading it than pagerank can tell us. We need the news organized not by links alone.

What we need is a search experience that let’s us discover the news in ways that fit why we actually care about it. We need a search experience built around concretely identifiable sources and writers. We need a search experience built around our friends and, lest we dwell too snugly in our own comfort zones, other expert readers we trust. These are all people—and their reputations or degrees of authority matter to us in much the same ways.

We need a search experience built around beats and topics that are concrete—not hierarchical, but miscellaneous and semantically well defined. We need a search experience built around dates, events, and locations. We need a search experience that’s multi-faceted and persistent, a stream of news. Ultimately, we need a powerful, flexible search experience that merges automatization and human judgment—that is sensitive to the very particular and personal reasons we care about news in the first place.

The people at Senator Kerry’s hearing last week seemed either to want to dam the river and let nothing through or to whip its flow up into a tidal wave. But the real problem is that they’re both talking about the wrong river. News has changed its course, to be sure, so in most cases, dams are moot at best. At the same time, though, chasing links and clicks, with everyone pouring scarce resources into an arms race of pagerank while aggregators direct traffic and skim a few page views, isn’t sufficiently imaginative either.

UPDATE: This post originally slipped out the door before it was fully dressed. Embarrassing, yes. My apologies to those who read the original draft of this thing and were frustrated by the unfinished sentences and goofy notes to self, and my thanks to those who read it all it the same.

When the Future Is Unlike the Past

First, pick an arbitrary point in time. Pick a year, any year A.D. up till your birthday or when you were twelve—this is your year. If you can, conjure up some idealized image of your year in your mind’s eye—nothing terribly analytic for now, just something holistic.

via kottke.org

Second, pick a year in time a few years back from your year, and pick a year a few years forward from your year. And, if you would, conjure up the same kind of images for these two years. Again, these need not be exacting—think of them as blurry, semi-liminal collection of facts and themes and truths and so on. You don’t need to memorize all the details of the goat, in other words—just some vague but substantive handle on it.

Third, get ready to perform some mildly unusual comparisons—not impossible, just a little strange, a little odd, but highly interesting, I promise. Try to imagine the difference between your year and the year a few years back. And while you’re at it, try to imagine the difference between your year and the year a few years forward too.

It’s a funny thing to try to imagine differences in the world over time. But that’s why we’re starting with this pretty easy exercise. It’s pretty easy to imagine the differences between things that are pretty similar—whether those things are different kinds of four-legged mammalian farm animals or different states of the world a few years apart.

Still, it may not be obvious to you what the differences are (1) between the world in your year and the world a few years before that or (2) between the world in your year and the world a few years after that. Given that you only care about the holistic view, you might be tempted to conclude that there are no substantive differences looking forward or backward. That’s fine—maybe there aren’t any.

But if there are differences within (1) or within (2), you should then be able to compare those differences themselves. Think of it this way. I grew up in Madison, Wis., which is about two hours from Chicago, Ill. Thus one difference between Madison and Chicago is location, and we can measure that difference in distance quantified by how long the drive is. Madison is about five hours from Minneapolis, Minn. Put this way, it’s natural to compare the differences between Madison-Chicago (two hours) and Madison-Minneapolis (five hours). That difference—that difference between differences—is three hours.

We can do roughly the same thing for your year looking back and your year looking forward. So you might say the difference between your year and the one a few years before is “small.” And you might say the difference between your year and the one a few years after is “small.” If so, the difference between the differences is zero. If the differences are “small” and “medium,” though, difference between the differences might be, e.g., “modest” or also “small.” And so on.

Whew. So the reason all this is important is that the differences between looking back a bit and looking forward bit are usually zero or small. Usually, change is constant. Our intuitions are largely built on this premise. In fact, we get terribly confused and distraught and sometimes incoherent when the difference looking forward is much greater than the difference looking back.

Consider the notion of precedent as legal philosophy. Scholars argue that precedents as reasons make the law more predictable—litigants can better predict the outcomes of law suits if they have some handle on the kind of reasoning judges will bring to bear. But why should law suits be predictable in the first place? That assumption reflects a deeper belief that similarities between previous cases and present or future cases are relevant at all. It reflects a belief that lawyers and judges can emphasize the relevant similar facts and ignore the relevant distinguishing facts. But how should lawyers and judges be able to make value judgments about which similar and distinguishing facts matter across different cases? It can only make sense to conform to precedent inasmuch as it makes sense—on average, I suppose, though even that is tricky given fat-tail risk—to take history as a competent guide to the future. Mere differences in time mean nothing.

But what if something so essential to our ability to reason did mean something? What if mere differences in time mattered legally? Or what if something seemingly arbitrary variable about the world mattered? What if, for example, we thought that events that obtained under a full moon were different from events that obtained under a new moon? We’d have at least two entirely different sets of legal precedents—one for full moons, one for new moons, and maybe one for other times. The legal world would be turned upside-down, inside-out. It would be nearly indistinguishable from what we actually have. The arguments that work under a full moon in our actual world almost certainly wouldn’t work in this crazy possible world. Not only would they almost certainly fail to persuade, but they would almost certainly seem deluded or insane—probably as insane as arguments highly sensitive to the lunar calendar would seem in the actual world.

The good news is that upside-down, inside-out changes are rare. The bad news is that their rarity doesn’t equip us well for when they inevitably crop up. We forget that there are any such changes, especially when they’re not attended by frighteningly salient facts, like nuclear weapons. It is easier, in other words, to wrap our minds around how thoroughgoing theories like mutually assured destruction change our reasoning, forcing us to question very basic assumptions, if we can at the same time point to devastating bombs and mushroom clouds.

But there is nothing so salient as for the news. Layoffs and newspaper closings amid a wider economic downturn just don’t cut the mustard. Sometimes the differences looking forward a decade dwarf the differences looking back a decade.

When that happens, when the near history no longer contains implicit clues about the near future, we are unmoored, and we look to look to the differences between differences as a partial guide—but just come to terms with our own imaginations, just to maintain some footing amid upheaval. In order to grasp some sense of how sweeping the next decade of changes in the news business will be, we’ve got keep inching back through time and technology till we arrive at the gut feeling that the differences are equal. When the differences looking forward and the differences looking backward are equal—idealized, vaguely but substantively—we can look to see what is common between the past world and the future one. And those common facts or truths are the only facts and truths we can carry forward as precedent, more or less unquestioned.

As with many businesses facing disruption from the internet, it is far from clear that there is anything common between what the news business will see a decade forward and what it saw even a century back. This is a muddled exercise in which we accomplish little more than calibrating our intuitions about what to discard and what to keep. But there is so much to discard that our intuitions are critical.

My gut tells me this, nuclear holocaust notwithstanding: It is no longer reasonable to carry facts true about the history of the news business into the future without detouring through first principles about journalism and why it’s important. Nothing true of journalism in a decade’s time will turn out also to have been true of journalism at any time in the past except those facts that will always be true.

All else is gone—that is what Shirky means when he writes, “There is no general model for newspapers to replace the one the internet just broke.” All else is gone, but first principles remain. And grasping first principles is why it’s imperative that “we shift our attention from ’save newspapers’ to ’save society.’” But don’t take “unthinkable” too literally; the future is thinkable. Shirky’s is a terribly useful figure of speech, but it is false. We cannot know or predict what the world will look like, but we can and should conduct experiments thoughtfully, not wildly. If we clear our minds of accumulated implicit assumptions about the newspaper business cloaked as timeless verities of journalism, we can arrive at a clean slate of first principles and begin to rebuild.