Is regulating the internet a direct threat to freedom?

Politicians are rushing to regulate the internet with the EU copyright directive, age verification on porn sites and now a new regulator of social media platforms to police so called online harms.

In this edition we look across the globe to Vietnam, who at the turn of the year passed a law banning any criticism of the government online and ask if here in the west we are heading down that same authoritarian path.

Photo by Headway on Unsplash

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Facebook wants regulation because it wants to strangle new ideas

There are many motivations for starting a company, but most of them involve having an idea.

It might not be an original one, but that idea is what fuels the company.

That idea is a way of providing a service or a product that will be successful and have demand.

You might have an idea that you know will only make a quick buck. You might have a game changing product that ultimately will influence an entire sector or culture.

You might just think you can do something everyone else is doing, just cheaper, or better.

But while you’re doing it, while your setting up the company and as you start to trade and continue to grow, you aren’t looking for the hardest and most expensive way of doing it.

You maintain your idea, but in the most efficient and value intensive way.

If it costs more than you can sell it for, then you might as well shut up shop, unless you can see a way to reduce those costs through scale, investment and technology.

What you don’t do, is embrace or encourage burdens on your business.

Yet that’s what regulation is.

Regulations are what a start up business has to find a way to fund. They are a direct cost to the business.

You might have raw materials, labour cost and the cost of manufacturing, shipping, marketing etc.

But you also have the regulatory cost. The cost of compliance.

And this is where regulation favours the large business, with its economies of scale and deeper pockets than the plucky start up.

It’s why you’ll never see a small business ask the government to regulate them.

It’s why the founder of Facebook just asked for the government to regulate it.

Look at us, we’re on your side, we are actually asking for rules to play by. We can’t possibly be evil.

Yet if Facebook wanted to protect its users, it could. If it wanted to invest in technology to filter content, it could pump billions of dollars into it.

The plucky little start up social media company can’t afford to do that.

And that’s why Facebook wants it.

They get to “work with governments” and governments get to say they “worked with industry” to set regulation and “protect” us. From whom, who knows.

But the sad irony, the counter intuitive fact of the matter, is that if government regulates Facebook (or rather the entire social media industry) then it has unwittingly done Facebook’s job for it.

It’s put a massive extra cost on being a social media platform, and thus instantly made it billions of dollars more difficult to become one.

Who do we want to challenge the Facebooks of this world? Only other global business leviathans with the means to navigate and pay the costs generated by regulation?

Or do we want real competition.  From new businesses of any size. From those that want to change and pivot quickly.

Facebook just asked to be regulated. Governments will now clamour to do so, when all they are doing is helping sustain and augment a monopoly.

Yet we should want those with new ideas to be able to disrupt.

To challenge.

To innovate.

The best way of coming up with something better than Facebook is to unleash the potential of those new ideas.

Free from constraints.  Free from burdensome regulation that only the large incumbents will push for in order to create barriers for those to challenge them.

Of course Mark Zuckerberg wants new regulation.

The problem is that no one else asks why.

Photo by William Iven on Unsplash

Every day hypocrisy: You cannot have it both ways

In this edition, we recap on what actually happened during & after our last podcast recording, and how it informed the way we discuss & debate issues.

By understanding & agreeing each others points of view, a whole vocabulary & context is created that makes examining issues far easier.

And then we explore a list of popular political, social & cultural contradictions.

Can you really have it both ways? We debate the hypocrisy and stupidity of our favourites.

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You may not agree with the Persimmon bonus policy but it’s not the fault of capitalism

“We are intensely relaxed about people getting filthy rich as long as they pay their taxes.” So famously said Peter Mandelson at the height of New Labour’s power and influence.

Often that quote is truncated to remove what is the fairly important point about paying tax, so it became a phrase focused on high earnings. But regardless it became not only a symbol of how far Labour had come on its journey into capitalism but ended up firmly part of the zeitgeist.

As I read the headlines and opinion pieces on what happened with Persimmon and its now former CEO Jeff Fairburn, I can’t help but feel that everyone has forgotten what capitalism actually is.

Even the people who are notionally trying to defend it, can’t help but gloat about Fairburn’s demise, or whine about his earnings. It’s termed a “pay scandal” and “crony capitalism”, but I would argue it’s neither of those things.

Let’s keep this simple: Jeff Fairburn has made a lot of money. You can argue as much as you like as to whether he has earned it, or whether he deserves it, but he had a job, which included rewards and incentives including a salary and bonuses. He didn’t steal this money. The system gave it to him.

He’s been CEO since 2013 and since then Persimmon has done well. The CEO was rewarded accordingly.

Now wait just a minute, I hear you say. And before I hear your protestations, let me try and get in there first.

“The only reason Persimmon has done so well is because of the inept housing policy of successive governments, including most recently the Help to Buy scheme.”

“Even his reduced bonus of £75m is an obscene amount of money.”

“There should be a cap on bonuses and the board should never have approved such a scheme linked to corporate value.”

“People like this give capitalism a bad name.”

“It’s a gift to Jeremy Corbyn’s Labour party.”

Any of those sound familiar? Maybe all of them.

But all these arguments are fundamentally missing the point. A pay scandal is where somebody hasn’t been paid what they are rightfully owed. It’s when different groups of people get paid wildly different salaries because of who they are, not the job they are doing.

This isn’t a pay scandal, it’s the politics of envy, plain and simple. How could anyone earn such a large amount of money? They must be awful.

Of course, Fairburn’s media appearances haven’t done him any favours. But he was hired as head of a house builder, not a PR agency.

But I’m not defending him personally or any action he has or hasn’t taken. The point is, the company he was hired as Chief Executive deemed it right to pay him this money (and they certainly made enough of it) and so in return he did a job.

Just because he has, so far, seemed incapable of reading the mood of the nation, doesn’t mean he should have earned less, yet I keep coming across articles that seem to suggest that for every public miscommunication an extra £5m should be lopped off his bonus.

Yet this isn’t how we treat footballers. Yes there are those who think that their pay is obscene, but they tend not to be the people who pay for the tickets or TV subscriptions to watch them play.

So where are we all going wrong? Well let’s start with this term “crony capitalism”.

I knew we shouldn’t have chosen the crony type of capitalism. We should definitely have chosen some kind of fluffy bunny type of capitalism instead. No, I’ve got it – “caring capitalism”. That’s what we’ve been missing all along. Just whatever we do, let’s not choose “death capitalism” – things could all get a lot worse.

Let’s call things what they are. Cronyism is cronyism. You don’t need capitalism for it to exist. In fact, far from it. You couldn’t get a system that encourages more cronyism than a collectivist one like socialism. Just look at Stalin’s Russia, or Maduro’s Venezuela.

The fact is that cronyism exists in every system, and the more a government intervenes, the more opportunities there are for people to get in on the gig.

Free markets are a tough sell. There’s no doubt about that. Explaining to people why Carillion going bust is ultimately a good thing takes some work, but it’s what true advocates of freedom should be doing, not becoming apologists for capitalism.

As soon as you start to advocate “good” capitalism over “bad” capitalism, you instantly fall into the trap the political left has set. And it was the easiest trap they’ve ever laid.

Because if you take one CEO, one company, one industry, then of course you will find things that you personally find unacceptable, unfair, or downright appalling. Your opinions on those entities or people will be valid. Problems will undoubtedly exist. But they aren’t a case for intervention.

Because truly free markets are driven by consumers. Free markets punish failure and reward success. They are bound by the aggregate decisions of everyone’s individual choices.

Competition for custom, and the permanent threat of failure is what drives companies to succeed.

If Carillion couldn’t make money, and were being propped up by government contracts, then it’s a good thing it no longer exists, so that a better company (or companies) can fill its shoes.

If Persimmon now think they paid too much to their CEO, they’ll review it and lower it. If the act of paying their CEO too much causes them somehow to completely fail, then it will be because they made the wrong decisions, and the market will see to it they are replaced by people making better decisions.
We must start explaining again the benefits of the system that has produced more wealth in the world than any other before it.

If there is a scandal here it’s that housing is treated differently by the state to other parts of the economy. We see the same in the financial sector and very much in healthcare.

While house builders are encouraged by the current regulations and government policy to land bank, and while they aren’t allowed to build on viable, useful (and not green) land in the green belt, the housing market won’t be free.

While there is quantitative easing, pushing up asset prices, and stamp duty discouraging sale, the housing market won’t be free.

Yes, in a free market economy, businesses will fail. But those are the businesses that should fail.

And yes, in a free market economy, some people will be paid handsomely for what they do.

But we must work to gradually remove the encumbrances from the housing market and others, as otherwise we will end up piling on more changes, more regulations and more intervention. Of course more intervention will all be with the best of intentions. But those intentions will have the unintended consequences we are already seeing. A small number of large incumbent providers lining their pockets, because the system encourages them to.

When I see the terms “broken markets” or “crony capitalism”, I can’t help but think we need to wake up from this delusion that the right person, the right policy or the right amount of intervention will “fix” the markets in the name of fairness.

The real scandal is that we’ve forgotten what free market capitalism really is.

Regulation, class, education and choice

This week we talk about burdensome regulation in the telecoms industry before discussing different ways of determining a person’s class, whether higher/further education is a good idea and the benefits of consumer choice.

Please visit our website to download or stream all our previous episodes and to read our articles.
Remember, you can now subscribe on YouTube ––UxzErq_UU5SCUtFg
Please reach out to us on Twitter:
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