Is Lobbying Closer To Bribery... Or Extortion?

from the depends-on-how-you-look-at-it dept

We've certainly talked quite a bit about the institutional-level corruption of the way Congress and lobbying works, but a recent This American Life episode, done in partnership with the Planet Money team takes a much deeper dive into how lobbying works. You absolutely should listen to it. It's really fascinating, even for folks who follow a lot of this stuff. There is also a full transcript, but hearing the whole thing is quite fascinating. Among the elements that are most interesting are the details of just how much time and effort goes into politicians raising money, and how the various fundraisers work.

But one thing that struck me in listening to it, was a comment made towards the end by (former) Senator Russ Feingold, who points out that while most people think of lobbying as bribery, they often have the picture backwards. It's extortion:

I've had conversations with Democratic givers out here in the Bay Area and I'll tell you, you wouldn't believe the requests they're getting. The opening ante is a million dollars. It's not, gee, it'd be nice if you give a million. That's sort of the baseline. This is unprecedented. And, in fact, one thing that John and I experienced was that sometimes the corporations that didn't like the system would come to us and say, you know, you guys, it's not legalized bribery, it's legalized extortion. Because it's not like the company CEO calls up to say, gee, I'd love to give you some money. It's usually the other way around. The politician or their agent who's got the Super PAC, they're the ones that are calling up and asking for the money.

This is actually confirmed much earlier in the show, when former lobbyist Jimmy Williams explains that part of the job of the lobbyist is to avoid calls from politicians who are always asking for money:

Jimmy Williams: A lot of them would call and say, "Hey, can you host an event for me?" And you never want to say no. Actually, no. You always want to say no. In fact, you always want to say no. But, you could look on your phone with these caller IDs and you would be like, really? I'm not taking that call.

Alex Blumberg: Oh, so you would dodge calls for fundraising?

Jimmy Williams: Oh yeah. Every lobbyist does. Are you kidding? You spend most of your time dodging phone calls. Oh yeah.

What's equally stunning as you listen to it, is how much everyone seems to dislike the system. The politicians hate having to spend many hours each day fundraising (which they do from phone banks across the street from the Capitol, because they're not allowed to do it from their offices). The lobbyists hate having to focus on raising money for the politicians. The donors hate getting the calls asking for more money. One politicians talks about how he burned out all his friends:

Walt Minnick: You essentially wear out your friends and you wear out the people who are your natural supporters, because if someone writes you one check or comes to a fundraiser, they get on a list. And three or four months later you call them back again. And the best thing about being an ex-congressman is my friends now return my phone calls.

The show concludes with a fascinating discussion between Senators John McCain and Russ Feingold, who famously passed campaign finance reform a decade or so ago, only to see most of what they worked for get tossed aside by the Supreme Court's Citizens United case. McCain explains that the Supreme Court ruled the way it did because it simply has no idea how corrupt the political system is today:

John McCain: At first, I was outraged. The day that Russ and I went over and observed the arguments, the questions that were asked, the naivety of the questions that were asked and the arrogance of some of the questioners, it was just stunning. Particularly Scalia with his sarcasm. Why shouldn't these people be able to engage in this process? Why do you want to restrict them from their rights of free speech? And the questions they asked showed they had not the slightest clue as to what a political campaign is all about and the role of money that it plays in political campaigns. And I remember when Russ and I walked out of there, I said, Russ, we're going to lose and it's because they are clueless. Remember that day we were over there, Russ?

Russ Feingold: Absolutely, John. I couldn't agree with you more. It clearly was one of the worst decisions ever of the Supreme Court. The trouble with this issue-- and I think John would agree with this-- is people have gotten so down about it, they think it's always been this way. Well, it's never been this way, since 1907. It's never been the case that when you buy toothpaste or detergent or a gallon of gas, that the next day that money can be used on a candidate that you don't believe in. That's brand new. That's never happened since the Tillman act and the Taft Hartley Act. And so, people have to realize this is a whole new deal. It's not business as usual.

So why doesn't it get fixed? Well, because the people in power now know how to use the system to win, so they're afraid to mess with it, and potentially lose their ability to use the system as it stands now to succeed.

Russ Feingold: We managed to get-- against all odds, we did get people. It took a lot of hard work. Now the problem is, of course, is people are reticent to do that because they got elected under the system.

Alex Blumberg: So it's just fear of change?

Russ Feingold: Sure. When you win a certain way, your people say to you, hey, this is how we do it and this is how we won. We better not mess with success. I think that's one of the problems in this presidential race, where not only the Republicans, but even my candidate, President Obama, has opened the door to this unlimited money through some of his people. It's hard to get people to change something after they win that way. And that's one of my worries about it.

It really is worth listening to the whole thing if you want to understand the institutional, unavoidable level of corruption in DC -- even if it's not the way you may have suspected it worked. The folks at Planet Money have also done some follow up stories that are interesting, including a detailing of the most and least lucrative committee assignments. In the full episode, they explain that committee assignments are all a part of the corrupt process. If you get on a "good" committee (define by its ability to raise more money from lobbyists), it also means that your party demands that you pay more money back to the party, or you may lose that lucrative committee seat. Still, it may surprise some folks that the least lucrative position is on the Judiciary Committee. That's the committee that handled SOPA and PIPA... which involved no shortage of lobbyists. The cynical voice in the back of my head wonders if part of the SOPA/PIPA fight was really about turning the Judiciary Committee into a cash-flow positive committee, rather than a cash-flow negative committee. Also, if you were wondering how/when most political fundraisers happen, there's a breakdown for that as well: If you've got the money, it looks like you could eat all your meals (and have some drinks) at fundraisers.

And if you're wondering where these fundraisers happen? Planet Money has mapped those out as well. The most common locations happen to (conveniently) form a ring around the Capitol: No reason to travel very far to collect your money, I guess...

Filed Under: congress, corruption, lobbying, planet money, this american life

Planet Money Continues To Show How Damaging Software Patents Are To Innovation

from the repetition-is-good dept

Just a week after the Planet Money team did the absolutely wonderful This American Life episode on problems with the patent system, the folks there are continuing to dig into the subject. This week they have an episode that includes interviews with two of the top experts on the subject: James Bessen and Nobel Prize winning economist Eric Maskin, both of which have done tremendous research into the problems of the patent system. In the podcast beyond explaining why the patent system is hindering innovation, they also take a stab at estimating the very real "cost" on innovation.

Of course, actually showing the specific costs is difficult, but Maskin and Bessen have a few different ways to show it. For example, Maskin talks about the research that shows an increase in patenting has not increased investment in R&D -- and, if anything, it's shown that investment in R&D has potentially been limited due to patents. They note that there's an overwhelming amount of evidence at this point that we would likely be seeing greater innovation "if intellectual property were relaxed." As he notes there are numerous "natural experiments" that provide data to support this.

Separately, they discuss Bessen's research into how much the market has valued the "loss" due to bogus software patent lawsuits from patent trolls. That research shows that patent trolls have basically evaporated half a trillion dollars in value and wealth from companies that are actually innovating. And yet, all Congress can do is pass a useless patent reform bill that doesn't even come close to dealing with these issues.

Filed Under: eric maskin, james bessen, patents, planet money, software patents

Planet Money T-Shirt Plans Include Recognizing That Copying Works For Fashion

from the good-for-them dept

Earlier this year, we wrote about how the NPR podcast Planet Money was planning to go into the t-shirt business to better understand the whole process of creating a small clothing retail operation, top to bottom. The idea was to create high quality t-shirts that people would actually want (and pay a premium for), rather than the typical cheapo t-shirts. I had been wondering what happened to that plan, because the Planet Money team hadn't mentioned it in a while, but they're finally back to discussing it, and the latest podcast, amazingly, hits on another topic we talk about frequently: how copying helps the fashion industry.

Unfortunately, the Planet Money folks refer to it as "stealing," even as they talk to a bunch of folks who explain how copying is what really helps the industry thrive. They discuss the awful new fashion copyright bill, and how it's likely to have seriously bad consequences for the industry and for consumers, noting even, that many economists recognize that intellectual property is not a good solution in many markets. If a market can thrive and be competitive without intellectual property, adding such monopolies to the mix can be a disaster, leading to greater employment for lawyers, but harm to everyone else. They describe how having something like a fashion copyright will make it so that the industry needs to "clear" pretty much everything they do with the lawyers first. That means things will be a lot more expensive, and anything that can't be "cleared" may never get made.

It may not be "new" to folks around here, who have known all this for years, but it's nice to see these ideas spreading.

Filed Under: copying, fashion, planet money, t-shirts

Economic Threat: Legacy Industries With Bogus 'Safety' Claims To Stop More Efficient Competition

from the sound-familiar? dept

NPR's Planet Money has started a sort of spin-off series which are direct interviews with smart people about the economy. Recently, it interviewed economist Raghuram Rajan, who is given credit as being one of the folks who accurately predicted the recent financial crisis. I'm always a little hesitant to give credit to people who "predict" financial upswings or downswings, because there's usually some serious confirmation bias problems, but Rajan definitely did a good job of calling out some of the specifics of what was likely to happen and which, subsequently, did happen. He now has a new book called Fault Lines, which suggests that many of the bigger world trends that resulted in the financial crisis are still in place, and we may be facing an even larger financial crisis going forward, since we did little to fix these underlying "fault lines." The first half of the interview is fascinating, discussing the political reality in the US that makes it nearly impossible to actually fix these problems.

However, the second half gets into a subject that is much closer to what we regularly discuss around here. In that part of the discussion, he points to certain economies that grew through the government pressuring local industry to focus on exports, with Japan being a key case study. However, he points out that by propping up a small group of these firms, it actually did great harm to local innovation and local economic efficiency. And then, at the end, he gives this example which should sound quite familiar:

Let me give an example: Japanese haircuts are extremely expensive. Part of the reason is productivity in the Japanese haircut sector is lower. So, an upstart comes up and says 'I'm going to start offering cheaper haircuts.' That's the typical way that competition pushes down prices. If you have cheaper haircuts, more Japanese will go get haircuts, and there will be more activity in the haircutting sector and you will get growth there. Well, the startup provides cheaper haircuts, but the existing barbers get anxious, because they'll have to cut prices and they're perfectly happy where they are with fewer haircuts, but getting more per haircut.

And so the "barber's guild" gets together and says: 'This is terrible. You know, this practice of offering haircuts, we have to find a way to nip it in the bud." And they have a brilliant idea. They say: "Well, offering haircuts without shampoos is un-hygienic. It's a bad idea. So, we're going to mandate that before every haircut, you have to offer a shampoo." Well, the nice thing is that all of the existing barber shops are equipped with basins and so on where you can offer a shampoo. But that new startup, because it's cutting costs and because it's cutting frills, doesn't have a basin where you can have a shampoo.

Well, in one stroke, in requiring a shampoo before a haircut, you've raised the cost of doing business for the startup. You've driven the startup to a corner. And, typically, they can't compete any more. And you've preserved the way of life for the existing barbers. In the process, though, you've far fewer haircuts in Japan than if you'd allowed much more competition.

You can see this play out in many sectors: transport, retail, construction. Where a few incumbents sort of monopolize what's going on and don't allow the kind of growth that would allow Japan domestic sources of growth as distinct from the export-sources of growth, which it typically relies on.

This is such a key point that gets overlooked in so many discussions, but is really the key theme about a very large percentage of posts on this site: recognizing the difference between real economic growth that comes from innovation that leads to a greater actual market size, and fake economic growth that comes from just the process of moving money around.

But that story of the Japanese barbershop sounds pretty damn familiar, right? It's the same story we just heard about hotels in New York trying to outlaw couch surfing. Or, as someone on Twitter referred to it: "Home sleeping is killing hotels." Or the story of a online carpooling efforts sued and fined for competing with the local bus company.

What's impressive, of course, is how the incumbents are almost always able to hinder the more economically efficient solutions -- the innovations that actually lead to real growth in the market -- by couching it in terms that make them look like they're being altruistic. In the Japanese haircut examples, it was about hygiene. In the stories about couch surfing and carpooling, it's about "safety." With the music and movie industries shutting down more efficient tools for distribution and promotion, it's about "protecting creators' rights." Of course, none of these are true. They're all just efforts to protect incumbent monopoly rents, so that they can be less efficient, collect more direct profit, but hold back overall economic growth and consumer surplus.

I think it's important to start calling out these sorts of ploys. Perhaps we should refer to them as "home sleeping is killing hotels" arguments, and point folks to Dan Bull's song on the subject:

Filed Under: economics, guilds, planet money, protectionism, raghuram rajan, regulatory capture

Planet Money Crew Merges T-Shirts And Journalism

from the hey,-that-sounds-familiar! dept

Just a day after we announced our combined plans to save journalism and sell some t-shirts, the always excellent Planet Money team at NPR did an entire show about their own plans to get into the t-shirt business. Planet Money, we've noted in the past, has really taken the concept of experiential journalism to new levels, by not just reporting on certain subjects, but getting really involved in the topics to better understand them. This is great.

And, their latest plan is to get into the t-shirt business to better understand what it's like to manage such a business. Of course, we've noted in the past that there's actually a ton of money to be made in the t-shirt business, even as some of our critics have mocked our business model ideas as being limited to just selling "looooooots of t-shirts" and little else. In response, of course, we sold a ton of t-shirts with that as the slogan (I'm wearing mine now).

The Planet Money podcast about t-shirts highlights a few interesting points that again fit in with plenty of the things we talk about here. For example, they spend time talking to a "trends" expert, who notes that the big thing in selling high end luxury t-shirts, is to include a "story" with the shirt. It's the story that gets people willing to buy the shirt. She mentions how some of the shirts have huge tags that include a detailed story about where the shirt was made. This kicks off a discussion among the Planet Money crew about how their whole business is telling stories, and they should be able to tell a good story with their shirt. This actually reminds me of the Significant Objects project that we've written about a few times, where a group of fiction writers sold random trinkets on eBay... but did so with a fictional story about the object. That fictional story (given away for free) made the little trinkets much more valuable, and they were sold for much higher than nominal prices.

It was yet another example of an infinite good (the story) being used to make a scarce good (the trinket) much more valuable. It's neat to see the same thing happening in t-shirts as well, as it sort of ties a bunch of these different ideas together.

Oh, and one last thing. In the podcast, they discuss how high end t-shirts, with high quality cotton, can sell for over $200, and talk about how their own t-shirt, which they insist will be a hell of a lot nicer than your typical cheap NPR t-shirt, will probably be sold for about $50. Given all of this, I should note that our own t-shirts are also high quality American Apparel shirts that are crazy soft and comfy... and are offered at the bargain price of just $25... including a one-year subscription to the Techdirt crystal ball feature. It's a bargain. So, if you're interested in t-shirts and journalism, you can pick up our high-quality "paywall" t-shirt to make sure people have to pay you to keep talking: Or just sign up for our brainstorming event on saving journalism, where you'll get the t-shirt as well... and maybe we'll even figure out a way to discuss t-shirts and journalism.

Filed Under: business models, journalism, planet money, t-shirts

OK Go Chats With Planet Money About The Music Business

from the here-we-go-again dept

The fantastic NPR podcast, Planet Money, interviewed OK Go frontman Damian Kulash, discussing the music industry, record labels and management secrets. In the interview, Kulash reminisces about the success that they had with their now-famous treadmill video -- and then contrasts that experience with the ridiculous policy against embedding forced upon by them by their label, EMI. This battle, of course, ultimately resulted in the band parting ways with their label. Since distribution channels are no longer tightly controlled solely by the record labels, once an artist has established their fanbase, it is now much easier for them to go it alone. This story is becoming increasingly common. From Trent Reznor to Amanda Palmer, dropping a label has become the new reason to celebrate for the latest generation of musicians.

That said, OK Go left EMI amicably, and Kulash is quite appreciative of the music labels. He calls them "risk aggregators" and commends them for funding the initial monetary investment necessary to get his band off the ground. However, with the costs of music production plummeting in recent years, the days of needing huge advances just to cut an album are numbered. Couple this fact with innovative funding models, like what Jill Sobule and Ellis Paul have been doing, and then the opportunity for new bands to find success looks bright. Kulash recognizes this opportunity for new bands to find new paths to success:

There's no known way from point A to point C or D or F anymore. ... There's all sorts of room for people to try new ideas and try innovative things. If people make cool stuff, and people are savvy in the way they deal with their cool stuff, I have no doubt that young bands will continue to rise to the top

The important takeaway here is that the new models of success may yet be discovered. Innovation by savvy people is still paramount. So, to succeed, the music industry needs to cultivate the entrepreneurial spirit and get out of the way of artists, instead of acting as a restrictive gatekeeper.

Filed Under: music industry, ok go, planet money

Financial Podcast Buys A Toxic Asset To See How It Works

from the reporting-by-getting-your-hands-dirty dept

I've written in the past how wonderful NPR's Planet Money podcast is. During the "dark days" of the financial crisis, it was one of the true beacons of light explaining in easy-to-understand detail what was happening, and exploring aspects of the story that the mainstream press glossed over completely. In the process, they broke some stories, highlighted some key aspects of the debate, and really brought a lot more people into the discussion about how we deal with the economic situation of the day. I still listen to every episode on the day it comes out, but in the last few months there really hasn't been that much going on in the economy that needed a really thorough breakdown.

Given that, it seems like the Planet Money crew has hit on a rather brilliant idea. Back when this whole thing started, of course, much of the focus was on the so-called "toxic assets," the derivatives made up of slices of mortgages that had been packaged and repackaged together in creative ways -- in theory to minimize the risk, but in reality, often putting all of the risk in one big basket made to look artificially safe. The focus on toxic assets has mostly fallen off the mainstream press radar, but the folks at Planet Money decided to check in on those toxic assets and dig into what a toxic asset really means. But they were having trouble getting their heads around what a toxic asset really is, how it functions and how to best explain it to their audience.

So they bought a toxic asset.

Literally, the four reporters on the team, along with their producer, each pooled about $200 of their own money, in order to buy $1,000 worth of toxic asset. They'll be tracking whether or not they make their money back, and if they make anything on top of that as well (any profits will be donated to charity). The podcast itself is fascinating, as two of the reporters spend a couple days with a company called Mission Peak Capital, based out in Kansas, which has been analyzing and buying up toxic assets. They go through the whole process of analyzing and bidding on a few of these things until they find the one they wanted. Mission Peak bought the whole asset for $36,000, marked down from $2.7 million, and then sold a $1,000 sliver to the team at Planet Money.

The Planet Money folks have set up a detailed interactive website that goes into great detail about what's in the asset -- probably a lot more detail than most previous owners of the asset knew about themselves -- as well as how much they've made and how long they have until the asset runs out for them (as more of the houses whose mortgages are included in the asset get sold, they get closer and closer to being kicked out of getting any of the remaining revenue).

The story itself is fascinating, but what really drew me to it is what a great example of modern reporting this is. This goes way beyond what we normally think of as reporting, and breaks down that mythical "impartial reporter" barrier in a very effective and useful way. Some people have suggested that the reason why journalism may be struggling these days is that people can go directly to sources themselves (or sources can broadcast themselves) without needing an intermediary to "write the story." Of course, that doesn't mean the role of a journalist goes away, but it changes drastically. In this case, the team at Planet Money has realized that in order to "report" on this story, they need to become the source themselves, and open that up wide to their audience. It's a fascinating and incredibly effective modern form of journalism, and I can't wait to see where they take it. They're already planning to try to track down some of the mortgage holders whose mortgages are in the asset, as well as homeowners and former holders of the asset. Even if you're not that interested in the details of a toxic asset, it's hard not to find the whole thing incredibly compelling. It's useful and educational interactive storytelling at its finest, which is what true journalism should be.

Filed Under: journalism, npr, planet money, toxic asset
Companies: mission peak capital, npr

Is It Really So Wrong For A Reporter To Have An Opinion?

from the modern-media dept

There's an interesting article by NPR's ombudsman, noting that Planet Money's Adam Davidson apparently went way over the line in a recent interview with Elizabeth Warren, who's in charge of watching over the TARP program to make sure it's not abused. Apparently a ton of people complained. Davidson apologized and NPR says that what he did was wrong and that: "It's important for journalists to treat whomever they are interviewing with respect -- and to keep their opinions to themselves. Davidson did neither."

The thing is... when I heard the original broadcast that caused the problems... I actually really liked it. Davidson is a smart and knowledgeable guy who's spent an awful lot of time digging into issues around the economic crisis to get to the bottom of them, and he had a reasonable point that he was trying to make, based on all of that knowledge -- and he challenged Warren on it. The reason I liked it was that it was a reporter actually challenging someone on something, rather than simply letting it stand. This is something that has been missing from reporting in many cases. It's what Jay Rosen has referred to as "he said/she said" reporting -- where a reporter asks questions to elicit a story from multiple parties, but never tries to ascertain if either story is true -- but just presents what the various people say. Davidson wasn't doing that. He was actually claiming that it seemed like Warren was trying to stretch the purpose of her job to do something that didn't necessarily fit in the role. And it was great to see a reporter actually say to someone "that's not true" because it felt like someone was finally getting challenged (no matter whether you feel Warren is in the right or not).

It was quite clear what Davidson's position was -- he laid it out -- and he challenged Warren, and it made for an interesting discussion. The whole idea that reporters must "keep their opinions to themselves" doesn't seem to make much sense. If someone is talking to a reporter and saying stuff that the reporter believes is wrong, don't they owe their audience the courtesy of digging deeper? I was impressed by Davidson, and am actually a bit disappointed that he backed down so quickly. It actually makes me wonder how much Planet Money will push back on people who state stuff that the Planet Money team feels is wrong in the future.

Filed Under: adam davidson, elizabeth warren, journalism, opinions, planet money, reporters
Companies: npr

Slate Realizes It Has A Valuable Community

from the take-a-hint dept

What will be the defining picture of today's economic crisis? The '30s had bread lines and the '70s had gas lines, but as Slate points out, "in many ways this economic crisis, despite its deepening severity, has been less visible than previous ones. You can't take a photograph of a collateralized debt obligation." So, like any smart media company these days, Slate is turning to the community for help capturing that iconic moment.

To do so, Slate has created a Flickr pool entitled Shoot the Recession that currently has more than 100 user-contributed photos in it. NPR's Planet Money has been doing this, too, but because Slate is more visual, it would seem that more people would be motivated. This is a smart move - it lowers the expense for Slate to report on the crisis and recognizes that people are motivated by things other than money (reputation being the big one here). But it is also smart because instead of reinventing the wheel, Slate loosely joins together another small piece of the web - Flickr. Though there is still a lot more Slate and its peers can do, this is a step in the right direction.

Filed Under: community, news, photos, planet money
Companies: slate