Caveat Lector…

May 21, 2010

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For whatever reasons–reduced newsroom budgets? the proliferation of complex issues?– the news media seems to have made a habit of reporting study results as reality, however inconclusive the studies actually are.  For the last decade or so, the unquestioning paraphrasing (even verbatim reprinting) of announcement releases  as “news” has grown endemic.

Case in point: a recent Research and Policy Brief (pdf) from the Institute on Assets and Social Policy at Brandeis declares that “the wealth gap between white and African American families has more than quadrupled over the course of a generation (1984-2007).”

The result has been very widely reported…  in a way that largely paraphrases the press release (e.g., here, here, here).  And it’s been very widely discussed… in a way that takes the report’s findings as stipulated (e.g., here, here, and here).

What’s interesting is that the Brandeis study is based on a “standing panel” (The Panel Survey of Income Dynamics, University of Michigan).  Other studies– like Ed Wolff‘s/NYU’s– use other data sets (in Wolff’s case, Federal Reserve data) and get radically different results (in Wolff’s case, while the gap is large, there’s been no change over the last couple of decades)…

To observe the obvious: either outcome is bad.  No change is certainly not good– but it’s a very different reality than four times worse.

Now, it’s easy to make cases for both data sets/methodologies… what’s striking to me is that most of the reportage takes no account of this “squishiness”; it recounts the Brandeis findings as if they’re as Platonicly-solid as a temperature reading.  (The one exception I’ve found in this instance is the public radio program Marketplace, which did cite the Wolff study.)

This is a moderately benign example of the phenomenon, as in this case, while the degree of response may be in question, there’s no directional policy impact from the imprecision:  the wealth gap between white and African-American families is either large or larger.  In either case, there’s an inequity to address.  But as the Census process grinds on– with an all-too-grounded fear on Bureau officials’ parts that the results will not be representative– the coverage of Brandeis study is a(nother) reminder of the epistemological challenges to informed citizenship and policy-making.

At least the Brandeis and NYU studies and the Census are trying to find “the truth”; even then, it’s a problem.  But the conflicting statistical arguments that rain on the debates over financial reform, immigration reform, health care, and the like are “evidence”– data cobbled together to make a point, to justify a position.  They’re not about “truth”; they’re about achieving an outcome.

Indeed, the noise level is sometimes so high that it’s tempting just to say “plague on all your houses”– to ignore issues altogether, or to deny all of the evidence as prima facie unreliable, precisely because it’s evidence.  But of course, denial isn’t an option; the issues at stake are simply too grave.

Happily, inconsistent data doesn’t have to mean paralysis.  There’s real disagreement, for example, on the specifics of climate disruption; still, the preponderance of studies– and the agreement of virtually every informed observer– make it clear that there is a huge problem on which we must act.  Like the income disparity between whites and Africa-Americans, the direction is clear.

But even these directionally-clear issues get murky as we try to get more specific, to divine trustworthy grounds for appropriate action.  And other less obvious issues (e.g., the aforementioned financial reform, immigration reform, health care, and the like) are even murkier, clouded as they are by a fog of statistical arguments– arguments that are too often amplified, not clarified, by the media.

There is reportage that regularly looks deeper– e.g., Planet MoneyHow the World Works– and commentary– e.g., Grasping Reality With Both Hands, Beat the Press– and thank the Lord for them.  But surely the real moral of this tale is that each of us needs to read (and watch and listen to) the news that we get much more critically…

We owe it to our society and to ourselves to make ourselves numerate– to develop the capacity to question constructively, to determine what we can know and what we can’t, to bracket the uncertainty we face– so that we can make better-informed decisions as to when and how to act.

Mark Twain (quoting Disraeli) famously observed that “there are three kinds of lies: lies, damned lies, and statistics.”  In facing them, it’s wise to assume that we’re on our own.

from Dealbreaker.com, November, 06
The New York Times Company closed today at $5.72

Moody’s has made it official:  The New York Times Company’s debt is junk.

And this, after the company took a dare-one-call-it-usurious loan from billionaire Carlos Slim, and announced plans to unload its share of the Boston Red Sox and off-load real estate…  estimates are that, in the face of a $400 million note due in 2009, all of this carries the company comfortably into…  2010.

Compared to the brief, flaming transit of Sam Zell at Tribune, The Times Co. looks positively stately.  But the important difference between the two is less flattering.  Zell had a plan: not good nor well executed, and one that crashed on the shoals of the credit crunch, but a plan.  If the Times Co. has a plan, it’s a very well-kept secret– one that investors and analysts alike are anxious for the company to divulge.

Because it seemed clear, even before Moody’s made the Times Co.’s debt (even) more expensive, that peripheral asset sales weren’t going to fix what’s ailing The Gray Lady.

Why doesn’t the Times Co. have a plan?  I’m certainly not privy to their exec com conversations, but I have what I’ll bet is a good hypothesis:

My friend and GBN partner Peter Schwartz once wrote a wonderful book entitled Inevitable Surprises– a meditation on a phenomenon that we often encountered as we talked about the future with companies.  We would raise trends for discussion, trends that we thought could have a major impact on the business in question– demographic (e.g., generational or immigration issues), technological (e.g., the web or biotech), political (e.g., global unrest or changing legislation/regulation), social (e.g., concern with the environment or social nets), environmental (e.g., concern with climate change or water), economic dynamics (e.g., bubbles that might burst).

Our hope was to stimulate a consideration of effective strategic responses.  But all too often, the executives with whom we dealt would simply respond “oh, we know that.”  Indeed, in the cases of some media companies, “oh, yeah, we cover that.”  The closer we got to the core of a company’s business, the likelier the dismissive “we already know” response.

And of course they did know.  The problem is that knowing is only the ante.  If that knowledge isn’t wrestled into understanding– understanding of the implications– and then into an effective plan for responding, better yet capitalizing, the knowledge is useless.  Indeed, it’s worse than useless, as it can promote a false sense that awareness somehow implies readiness.  This is painfully hard work, because it strikes at the heart of the company’s historic advantages– and at the soul of manager’s sense of himself/herself.  Great companies find the strength and do it; most companies don’t.  To wit, the reality that in times of tremendous change, most legacy companies don’t (in the words of Geoffrey Moore) cross the chasm– don’t succeed in the reinvention necessary to survive and prosper in a new environment.

And so the title of Peter’s book:  Inevitable Surprises– managers caught off-guard, companies hobbled by developments they knew were on the way.

The Times Co. seems to me a sad example of a legacy company confronting an inevitable surprise.  Its writers have been leading chroniclers of the technological, economic, and social upheavals that are now eating away at its franchise.  But to all appearances, the company hasn’t found the strength to act on that insight, to make the changes that it’s going to take to survive, much less to succeed.

Of course, the Times Co. is just one player in a spectacle that’s playing out broadly across the economic landscape.  From other media companies through auto manufacturers to retailers, the managers of legacy companies are facing their own sets of inevitable surprises. The bursting of the credit bubble simply amplified  these issues, called them into stark relief.

But the economic crisis may have been a godsend.  Its very extremity may, for some anyway, break the hypnotic hold of the past, may punch through that extraordinary capacity that all of us humans have for denial– it may be the spur that it takes to move managers to meaningful action. In any case, it certainly provides “cover.”

Scenario planning, the craft that Peter and I ply, is one technique for breaking through to effective strategies, and it works.  But not every company needs it.  What every company does need is the strength of vision to look past the biases of history, and the strength of will to act on what they see.

And so it may not be too late for (at least many of) these companies; it may not be too late for the Times…  I certainly hope that it isn’t.  I would miss the crossword puzzle.

Julius Genachowski

I confess to being delighted with President-elect Obama’s naming of Julius Genachowski to Chair the FCC.   I’ve gotten to know Julius through a board on which we sit together– and found that all the things that folks like VC Fred Wilson and (even) The Wall Street Journal are saying about him are blissfully true– he’s *very* smart, terrifically open-minded and curious, deeply grounded in both the issues of telecom/broadcasting and in the ways of Washington, and (as Wilson puts it) “an honest, decent guy.”.

Still, the occasion begs the question of the new Administration’s priorities– which issues will move up the priority ladder; which, down… what the thrust will be.   A couple of thoughts:

Over the last few years, there’s been much discussion at the FCC and in the entertainment industry of “A La Carte,” the notion– a favorite of out-going FCC Chair Kevin Martin– that all cable channels should be offered for individual purchase, not bundled as they currently are.  A La Carte advocates argue that it’s unfair for consumers to pay “cross-subsidies” to support channels they don’t watch. As another A La Carte fan, John McCain asked, “why should my 92 year old mother have to pay for ESPN in her cable package?”

Understandably cable system and network operators feel differently.  Eliminating bundling would, they argue, eliminate the opportunity to develop new channels, and would ultimately mean that consumers would pay the same total for cable ($60+ per month) or more, and receive fewer channels.   FWIW, while I find the democratic urge of A LA Carte enticing, I tend to agree with the operators.  (Disclosure: I was in the past a cable network operator myself, and consult on occasion to both network and system ops… still, of course, I think that I’m right.)

Which way will the Obama-Genachowski FCC go?  Consider a theme that runs through the Journal‘s piece:

Mr. Obama pledged in his [technology] plan [which Julius basically wrote] to revamp government programs to expand the reach of high-speed Internet service. Mr. Obama also expressed support for “network neutrality,” which prohibits carriers from moving some Internet traffic faster at the expense of other traffic…

The Obama tech plan called for the U.S. to increase its definition of “high speed” Internet and reform a $7 billion federal phone-subsidy program to help cover the costs of offering broadband in rural areas. It also called for encouraging diversity in media ownership, a signal that efforts by big media companies to expand their empires could face tougher scrutiny.

More high-speed internet, more broadly available, more “democratically”…  the good news for the cable incumbents is that this probably takes the heat off of A La Carte as it’s been recently discussed– the unbundling of cable networks– for at least several months.  The other news is that, to the extent that it succeeds, it sets up the infrastructure for “a la carte on steroids”: IPTV, television over the internet… in which case it won’t matter whether a la carte cable channels were a good idea or not; a la carte programs will be a reality.

Folks in the entertainment business are fond of observing to each other that no one voluntarily watches shows on computers or phones when TVs are an option…  But in fact viewing on “computers”– likely terrific monitors that are effectively TVs (only better than most, and connected to the web)– is steadily rising.  And one of the few newsworthy items out of CES last week was the proliferation of internet-enabled televisions.

In the same way that we can look back at Jimmy Carter’s naming of Alfred Kahn to head the CAB as an early indicator that, within several years, the airline industry would be almost unrecognizably different (see here), so we may look back on today’s announcement in the same way, as a harbinger of a home entertainment and information landscape about to be undergo a sea change.

So, all of us “civilian” viewers had better limber up our clicking fingers.  And at the same time, it seems to me prudent for incumbent companies to accelerate their thinking (and modeling/simulating/experimenting) about how they would play in a world in which IPTV is the organizing principle, not just the novelty side show it is today… and to ponder how to play current distribution relationships and rights agreements in a way that’s robust against that possibility in the meantime.

An IPTV future will be an astoundingly profitable one for some– it’s a great time, economy be damned, to be pioneering for the new IPTV platform.  The question is whether the incumbent players can adjust fast enough and effectively enough to be among those winners.

In any event, IPTV can have some happy side effects for both providers and viewers/users…  By way of example, the Journal also noted this:

Mr. Obama’s plan advocated using technology to help “protect our children while preserving the First Amendment” [c.f. Common Sense Media, the organization of which Julius and I are both directors-- at least until he's confirmed, and may well need to resign from that Board]…

One way to “use” technology is to multiply consumer choice and control so that age-appropriate alternatives co-exist with inappropriate ones in a way and at a scale that make it easier and easier for parents to say “yes” to entertainment they feel is right for their kids.  An IPTV future (abetted by a ratings system like Common Sense’s) can deliver that– and in so doing, reduce the pressure to censor distribution.

Another potentially happy side effect: In a fully-distributed high-speed internet/IPTV future, the Customer Relationship Management (CRM) systems in which media companies are busily investing will be effectively inverted.  As the emphasis shifts (as it will have to) from “Management” to “Relationship,” these new systems will become ways in which viewers/users can have more direct and more effective impact on the services they receive– in some cases, even contribute to them.

And so on and so on…

In any case, that Julius is a close advisor and an old friend (law school classmate and basketball teammate) of the President-elect, along with the simple fact of Julius’ own powerful competence, suggests that the goals sketched in the Obama Technology Plan will have some real priority in the new Administration.

These are simply my deductions (my motto remains the quote from Yogi Berra in the title of this post). Still, if there’s anything to them, they’re sure to be mirrored in similarly smart, forward-looking, and (small “d”)  democratic moves across the telecommunications landscape.

That’s probably going to be a good– a very good– thing. And it’s for sure going to be interesting.  Very interesting.

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