Michael Lewis and David Einhorn have a terrific couple of articles in the New York Times today. They cogently trace the structural causes of our current financial crisis and recommend a number of obvious fixes.
The critique which most resonated with me was the focus on short-term profits that leads to risky behavior and long-term failure. For example, starting three years ago, a private investor named Harry Markopolos repeatedly tried to sound the alarm about the Madoff Ponzi scheme, writing and speaking with S.E.C. regulators who did nothing to stop the enormous fraud. The reason no one stopped Madoff and the reason we are in this crisis is because all involved have misaligned interests.
OUR financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that’s the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest.
The tyranny of the short-term manifests in credit rating agencies who make money off the firms they are supposed to rate honestly. It shows up in the S.E.C. where regulators seek good relationships with financial institutions in order to receive higher paying jobs in the private sector. It’s on display with bank executives who will be forced out if they don’t make short-term profits.
This is something about which I’ve worried for a while: how do we imbue our market-driven firms with long-term thinking? Quarterly earnings reports, expected to be better than 3 months before, seem like a good idea for shareholder accountability, but it also forces firms to make short-term decisions that may harm their long-term interests.
Lewis and Einhorn are dumbstruck that 18 months into this situation, next to nothing has been done to solve these structural problems. Although they have their disagreements with how Treasury Secretary Paulson is managing the problems (they advocate letting the banks fail), the more important, long-term problems haven’t been addressed.
Their solutions are:
- Stop making regulatory decisions with long-term consequences in fear of their short-term effects
- End the official status of the rating agencies - either privatize the rating or do it publicly
- Regulate financial innovations like credit default swaps (see Bookstaber’s book for their danger)
- Place capital requirements on banks or break up banks into parts that are small enough to fail
- Don’t allow S.E.C. officials to work on Wall Street, but encourage the flow in the opposite direction
I’m glad sensible, structural proposals are being put forth and hope Obama and the incoming Congress head them.
In Tim Wu’s new review of Jonathan Zittrain’s The Future of the Internet and How to Stop It, the Columbia Law professor spends considerable time explaining how the economics of media have historically led to a consolidation that many would see as anathema to the diverse marketplace of ideas that we want. His discussion is well worth a read, but what I thought was most important from the piece was his mention of the many threats to the generative Internet:
“But I must part company with Zittrain over his main and more somber argument: that security crises will form the driving narrative of the Internet’s future. I do not doubt that there will be never-ending security problems and reactions. But the question is not whether cybersecurity will matter, but whether it will matter most. Zittrain’s security saga does not look to me like a full account of the future. He is leaving out many of the external forces that will change the Internet. One is the power of government, which, especially overseas, has begun reshaping the network to fit its obsessions. Another is the combined forces of language and culture, which are driving a once-global Internet into something more like a series of national ones: a Japanese Internet, a Spanish Internet, and so on.
But most important, the real story may lie in the power of industry structure and the long trend toward centralized control in the media industries. Over the last decade, the Internet has become interwoven with media and communications industries collectively worth trillions, with economics all of their own. Unlike Zittrain, I think that industry dynamics, more than a demand for safe appliances, will determine the future of this strange and extraordinary medium.”
A Typology of Threats to the ‘Net
So which threat is the most disconcerting? He points to four:
- Zittrain’s security-driven adoption of sterile devices,
- Wu’s economic-driven centralization,
- Zuckerman’s culture- and language-driven splintered Internet, or
- Barlow’s government intervention
Personally, I’m inclined to think a splintered net is the most troublesome because it destroys the forum for international conversation and deliberation we wanted the Internet to become. But what macro trend concerns you?
When I was younger, I had very clear political ambitions. I wanted to climb the D.C. ladder.
That is, until I realized that some of my political convictions were strongly against the politically correct positions high-powered politicians were expected to have. In middle school I was writing my Senators condemning China over its Tibet policies. More recently, my digital history is strewn with strongly worded denouncements of powerful interests like the big content industries. All of this is not even touching on the realities of friendships played out online - jokes that may strike third parties as off-color or unprofessional.
The reality of having lived a strongly opinionated and Internet-heavy life is that I have a history of content which could easily be dug up by opposition staffers after a would-be appointment. Luckily for me, for the most part I don’t think my skeletons will ever be worthwhile to dig up. But plenty of my generation’s closets will be searched. What to make of the coming storm?
The Economist jumps into this fascinating question with a very smart article discussing the future of politics and reputation. Astutely noting, “who has a closet without a skeleton?,” the article uses Obama’s intensive vetting process as a harbinger of things to come.
But I don’t think that covering up people’s unsavory pasts is likely to be sustainable. Instead, I think we are moving towards a society of disclosure and acceptance - Obama never had to confront breaking news that he tried cocaine because he disclosed it well before he was a Presidential candidate. Not everyone can have best-selling books, though.
Instead, I think the next forty years will be a roller coaster where my generation’s past will sink many a rising star. Only the most adept will be able to avoid the career-stunting attention paid to their youthful indiscretion, but, in the end, we’ll (hopefully) have a society more accepting of the human, in failure and success. We’ll turn the media spotlight on ourselves and recognize that we’ve all done things we’re not proud of and that it doesn’t mean we are unqualified for public office.
The Economist reaches much the same conclusion. Although it seems that, “Only the very blandest, most media-savvy and controlled people, who have never uttered a controversial sentence in their lives, will be deemed fit to hold public office…” another possibility is that “Perhaps, when dirt on almost everybody becomes readily available, politics will lose its hypocritical, moralistic tone… That could make people realise that politicians, too, are only human, and make them more forgiving of minor transgressions.”
What do you think? Are we destined for blandness or acceptance?
Elizabeth Pisani was there at the beginning. A trained epidemiologist, Dr. Pisani has spent years interviewing hookers in seedy bars, chatting with junkies in train stations and exhorting bureaucrats to take smart steps to stop the spread of HIV/AIDS. In The Wisdom of Whores: Bureaucrats, Brothels and the Business of AIDS, Pisani gives a whirlwind, first-hand tour of the uncomfortable realities of the global HIV epidemic.
While Pisani certainly knows her science, this is not a academic work. Often, reading it seemed more like you were listening to the author rant about boneheaded policies over a couple beers. Her writing is equally informative, hilarious and disconcerting.
The millions infected with HIV/AIDS did not need to be; there are well-established methods to prevent and treat the disease, but they require inconvenient truths. Rare is the politician who wants to admit his country has a heroin problem. Even rarer is the politician who will then do so publicly, repeatedly and provide clean needles so the virus doesn’t spread. The same wrongheadedness is found in donors, NGOs, ministries of health and civilians, and Pisani lambastes them in equal, deserved parts throughout the book.
The book might have been called “Confessions of a AIDS Activist,” but Pisani points out it is curious that “cancer activists” or “dengue fever activists” do not exist. A large reason for this is because HIV/AIDS disproportionately infects the marginalized in society - gays, prostitutes and drug addicts. As public health experts began to realize that this disease was going to tear through society, they had to convince politicians and the public that the disease mattered to them, as well. This took the form of “beat ups” where data was described in simple, dramatic terms to overcome the realities of politicians who care more about votes than lives. The sad fact is, this still needs to be done in many countries.
Dr. Pisani is painfully honest and opinionated. Her iconoclasm is aimed at commonly held beliefs like “AIDS is a development problem” and “the more people working on this, the better.” She dedicates an entire chapter to breaking down the religious leaders’ arguments that have led to idiotic, non-scientific policies and contributed to the death of those with AIDS. For example, George Bush’s “President’s Emergency Plan For AIDS Relief” has been heralded as one of his shining foreign policy achievements; however, the influence of conservative Christians has propagated ineffective abstinence only plans and severely curtailed needle exchanges. Although he deserves credit for throwing a lot fo money on the table, “…by law, 20 per cent of the PEPFAR money must be spent on HIV prevention, and one-third of that is specifically allocated to programmes that do nothing but push abstinence until marriage. That is US $1.06 billion to fund foreign programmes that have a failure rate of 76 per cent…”
The reality of HIV/AIDS is far more complicated than a brief review or single book can do justice. But the take-away fromm Pisani’s account is that although the biology is easy and the epidemiology well-known, the answer to how to solve this problem requires patience, collaboration and smart policies. It depends on the specific contexts in each society, city and brothel.
Pisani’s blog is here.
Ari Melber, writing in The Nation, discusses the options Obama’s administration will have given the persisting digital connections between voters and his presidency - the phone numbers, email lists, MyBO members and the existing desires, manifest on Change.gov, to be involved and heard by the transition team.
He touches on a worry I’ve had, given Obama’s support and his unprecedented network to them.
Many Obama supporters want the network to turn from electoral politics to lobbying. After the election, half a million activists responded to an e-mail survey about the road ahead. The most popular goal was to help the administration “pass legislation,” according to campaign manager David Plouffe. If Obama’s initiatives stall in Congress, these activists will presumably back him instead of their local representatives. Combining the White House bully pulpit with constituent lobbying could have a dramatic effect on Obama’s presidency. Previous presidents have gone over the heads of Congress by appealing to the public, of course, but never with a parallel whip operation targeting representatives in their backyards. If the pressure works, the experiment could even alter the conventional balance of power. After all, citizens typically lobby the legislature for their own policy goals–not on behalf of another branch of government. While George W. Bush boosted executive power by routing around Congress, Obama may fortify executive power by mobilizing citizens to roll right over Congress.
The worry is that because local representatives do not have the digital Rolodexes stretching into the millions, they will not be able to motivate their constituents to the same extent Obama will. Any basic civics course will teach why slow deliberation is desirable, but Obama’s potential ability to force the hand of legislators will continue the consolidation of power in the executive branch that George W. Bush has so forcefully done.
Melber rightly points out, though, that the network isn’t merely a push medium - as Clay Shirky and Yochai Benkler have so convincingly shown in Here Comes Everybody and The Wealth of Networks, respectively, digital tools empower the individual, as well. He points to MyBarackObama members using the campaign’s social network to protest against Obama’s support for warrantless wiretapping. The example, though, points to the unfortunate reality: although Obama heard the dissidents, he didn’t change his upcoming vote.
What remains to be seen, though, is whether other political offices can take advantage of the same tools. Are local representatives able to attract widespread attention for their social networks? It certainly makes sense to have an agora where all politicians could hear the voice of the people without CNN’s filters or Fox’s bias. Does it make sense for Congress to have a social network? Or, as the article points out, will that only be one more node that organizers have to address? Perhaps data portability can become a democracy 2.0 theme?
What do you think?
My friend Ben’s new post musing about the commons reminded me that I never posted a review of Michael Heller’s “The Gridlock Economy” that I read over Thanksgiving weekend. Unfortunately, I’ve neither my book nor my notes, so this will have to be brief.
Heller is a law professor at Columbia and writes one of the most important books that the free culture movement has ever received. The subtitle of the book is, “How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives” and Heller does a terrific job of providing an approachable explanation of why private property is not an absolute good, but instead a institution whose prevalence must be tuned to the happy medium.
Since the 1960s, the idea of a “tragedy of the commons” has been well-known to economists, lawyers and policy makers. A commons, where no one owns private property, is threatened by overuse: if everyone’s cow can use the local field, people will not manage the property correctly and the commons will be tragically over-grazed. This observation, generally applicable to many domains, was a part of the reason towards privatization - if not enough property is tragic, more property must be good! Or so the reasoning went.
Heller, however, realized that too much property can be bad. He first noticed this in post-Soviet Russia as a World Bank analyst. While the store fronts were empty, just feet away thousands of street vendors sold every good imaginable (but mostly just vodka and Tolstoy… just kidding). The reason, he realized after speaking with the vendors, was that to set up a formal brick-and-mortar store required jumping through numerous hoops. A street kiosk only required 1-2 bribes to be in business.
Heller calls this the “tragedy of the anticommons” and it shows up all over:
- Competing property claims stops nearly all airport expansion in the U.S., leading to innumerable delays.
- Patent thickets stop the development of new drugs
- The wireless spectrum is poorly allocated due to an anticommons
- African-American farms are split up over generations into smaller parcels until they are worthless and sold
The list goes on and causes serious economic and social ills. One of Heller’s main goals with the book is to raise public awareness of the problem because it can be solved, but only if it is correctly diagnosed as gridlock. So, go buy, borrow or rent the book, and read it!
Cleaning up my feeds, I came across a month old Kottke post where he muses about the broken window theory as it relates to online communities.
For those unfamiliar with it, in its most simple terms, the broken window theory postulates that if a window in a neighborhood is left unmended, other windows will soon be broken, too. More generally, it emphasizes perceived community standards as a basis for action: if I think this is a community of respect and good-nature, I am more likely to act similarly.
In a recent post, I argued that viewing anonymity as the proximate cause for negative behavior is not only false, but dangerous. However, Kottke writes,
Unchecked comment spam signals that the owner/moderator of the forum or blog isn’t paying attention, stimulating further improper conduct. Anonymity provides commenters with immunity from being associated with their speech and actions, making the whole situation worse…how does the community punish or police someone they don’t know? Very quickly, the situation is out of control and your message board is the online equivalent of South Central Los Angeles in the 1980s, inhabited by roving gangs armed with hate speech, fueled by the need for attention, making things difficult for those who wish to carry on useful conversations.
Certainly it is true that trolls benefit from anonymity, but I can think of plenty of trolls from my online experience who are happy to disrupt communties openly.
But I think Kottke misses the point of the theory. The broken window theory advocates quick post hoc reparative action. Trolls should be condemned and spam deleted, so that the next would-be troll doesn’t see the “broken window.” Online or off, would-be trolls and criminals will inhabit the community, but the broken window theory exhorts us to constantly fight against them, regardless of name or identity.
If you’re interested in media trends, the connection between cognition and the Internet, or are simply a fan of Clay Shirky, then you’ll want to check out Columbia Journalism Review’s recent interview with him. Some key points:
On literacy in an Internet age:
Many, many more people are reading and writing now as part of their daily experience. But, because the reading and writing has come back without bringing Tolstoy along with it, the enormity of the historical loss to the literary landscape caused by television is now becoming manifested to everybody. And I think as people are surveying the Internet, a lot of what they’re doing is just shooting the messenger.
On the effects of abundance:
If you want to point to more proximate harms, it would be very hard to argue, for example, that innovation, inventiveness, new intellectual discoveries had slowed as a result of the Internet, and so people are left with these kind of mealy-mouth cultural critiques, because nostalgia becomes the only bulwark against change. The actual effects of making more information available to more people have been enormously beneficial to society, yet not to the intellectual gatekeepers in the generation in which that change happened.
On information overload:
The reason we think that there’s not an information overload problem in a Barnes and Noble or a library is that we’re actually used to the cataloging system. On the Web, we’re just not used to the filters yet, and so it seems like “Oh, there’s so much more information.” But, in fact, from the 1500s on, that’s been the normal case.
It’s a great interview and well worth your time. And, just found, is part II of the interview.
I just finished Richard Bookstaber’s A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation and my head is spinning from the packed pages with dire implications for our financial system. Bookstaber’s decades of running risk-management for Morgan Stanley, Salomon Brothers and assorted hedge funds make this 2007 book seem almost prescient in light of today’s subprime-induced meltdown.
Bookstaber’s central argument is that financial innovation - Wall Street geniuses creating new products - increases the complexity of the market to an extent that it is impossible to understand and manage, leading to the dramatic events of the past twenty years. These are dramas Bookstaber saw first-hand, and by his own admission, helped engineer as an MIT PhD working on the cutting edge of finance.
The book is both history and theory, though being far from a finance expert (I often relied on my Dad’s explanations over the past two days), the theory was far more interesting and will be the topic of this post.
The history, though, is also compelling. It chronicles the numerous catastrophes of the past 25 years including 1987’s crash, the Internet bubble and Long Term Capital Management’s implosion. Bookstaber explains how these disasters were not due to outside forces (say, an oil shock), but due to the financial system itself. As investment strategies became increasingly sophisticated, aided by top mathematical models and cutting-edge technology, failure increased. The opposite should have been true: Nobel Prize winning academics were devising financial products and investment strategies to more fully quantify the market. However, fundamental, endogenous differences prove to be insurmountable barriers to financial perfection. The reasons are two-fold: the normality of accidents and the limits of human knowledge.
Complexity, Tight Coupling and Normal Accidents
I first encountered Charles Perrow’s book, Normal Accidents, while reading about another interest of mine: climbing. In his impressive book, Deep Survival, Laurence Gonzalez draws heavily upon Perrow’s insights to explain why accidents in outdoor sports are not only likely, they are standard. The idea showed up again when studying nuclear reactors in my Science, Technology and the Global Arena course last semester. A theory that applies equally well to climbing Mt. Hood, Three Mile Island and the fall of Long Term Capital Management should clearly be required reading, but many remain unfamiliar with Perrow’s brainchild, now decades old.
A normal accident is one which unavoidable due to the structure of the system. Systems which lead to normal accidents are complex and tightly coupled. Complex systems are nonlinear structures where actions in one area cause events among the system. No individual completely understands a complex system, whether it be a space shuttle or modern market, and no amount of testing will ever uncover every possible outcome. By itself, a complex system isn’t prone to catastrophic accidents; the problem comes when the system is also tightly-coupled, meaning processes are time-dependent. If a book isn’t reshelved at a library immediately, no serious problem emerges because a library isn’t tighly-coupled. If, however, a nuclear reactor safeguard doesn’t kick in immediately, a cascade of errors will quickly lead to disaster. There is little slack in a tightly-coupled system, so exactness is important.
Today’s financial markets are both complex and tightly-coupled. They are complex, in large part, because banks hold leverage around the world - meaning that problems in Japan can quickly reach Brazil, even if no direct economic connection exists. “The tight coupling in financial markets comes from the nonstop information flow and unquenchable demand for instant liqudity.” The result is the presence of normal accidents of historic proportions. The history of financial markets also shows this: the famous Dutch tulip mania only reached manic proportions when someone had the bright idea of creating forward contracts, so traders could “buy” tulips that didn’t even exist and proceed to trade those pieces of paper on the expectation of a flower crop.
Financial markets, complex and tightly-coupled, are bound to have failures like the one crippling the economy today. The easy answer, resonating especially hard today, is to regulate the industry. Yet, the most common forms of regulation only add to complexity, and thus accidents. Bookstaber argues that regulation should seek to reduce complexity in the first place, rather than try to control it after the fact.
The Limits of Knowledge
The second theoretical discussion, and where I think Bookstaber is at his strongest, is in his discussion of the limits of human knowledge. In it, he channels some of Nassim Nicholas Taleb’s “black swan” proposition, but curiously fails to mention his fellow quant-turned-critic. Bookstaber takes three decently well-known concepts and molds what I found to be a spectacular chapter about epistomology (can epistomology be spectacular?).
The first of those is Kurt Godel’s proof that nothing can be proven invariably. The primary example are the self-referential statements known as the Liar Paradox. “This statement is a lie” cannot be true because doing so would contradict it. Godel’s point that not everything followed a logical path was magnified by Wener Heisenberg’s famous Uncertainty Principle which showed that by simply observing a particle, it was changed. The result was a recognition that it was impossible to objectively know something precisely, and the harder we tried, the more variance resulted. The ability to know the future disappeared because we could not accurately know the past or present. Bookstaber writes,
“This metaphor extens neatly into the world of financial markets. In the purely mechanistic universe of classical physics, we could apply Newtonian laws to project the future course of nature, if only we knew the location and velocity of every particle. In the world of finance, the elementary particples are the financial assets. In a purely mechanistic financial world, if we knew the position each investor has in each asset and the ability and willingness of liquidity providers to take on those assets in the event of a forced liquidation, we would be able to understand the market’s vulnerability… Practically, it wouldn’t work. Just as the atomic world turned out to be more complex than Laplece [Heisenberg's predecessor] conceived, the financial world may be similarly comlex and not reducible to a simple causality.”
The reasons are manifold, but rest primarily on the fact that traders do not exist in a vacuum and do not hold perfect information. Transparency increases result in liquidity decreases - as we seek to observe (by increasing transparency), we change the market (by altering the supply of liquidity).
The final piece of Bookstaber’s argument for accepting human ignorance is the work of Edward Lorenz, commonly known as the “butterfly effect.” So-called because a hypothetical flap of a butterfly’s wings may be magnified over weeks to effect the weather across the globe, it comes out of the recognition that minuscule perturbations can have astronomic repercussions. Indeed, because because Heisenberg showed that we cannot measure without some error, “for many dynamic systems our forecast errors will grow to the point that even an approximation will be out of our hands.” As Kevin Kelly pointed out, increased understanding only leads to increased awareness of ignorance.
Coarse Behavior
Then what about the billions of dollars run through advanced algorithmic trading schemes? How should an investment firm structure to avoid normal accidents? Bookstaber is weakest when it comes to recommendations (possibly because he is not a policy wonk, possibly because he runs a hedge fund of his own), but he does include some interesting discussion of the value of coars behavior.
Looking to biology, Bookstaber sees the cockroach as the ideal risk-manager; after all, it has survived tectonic changes in environment and continues to outwit human predators. The reason is because its defense mechanism consists of the rather unsophisticated rule: if a puff of air is detected by its fiber nervous system, it scurries. The puffs may or may not signal an approaching predator, but the cockroach runs anyways. As Bookstaber writes, “This risk-management structure is extremely coarse; it ignores a wide set of information about the environment - visual and olfactory cues, for example - that one would think an optimal risk management system would take into account.” That is, the cockroach filters out all but the essential, if at times inaccurate, indicator of doom. As Clay Shirky said at this year’s Web 2.0 Expo, it’s not information overload, it’s filter failure.
Compare this to animals like the oddly named furu, a finely-tuned product of Darwinian selection - specialized in almost every way for its environment. The furu, though, suffered near extinction when an alien species was introduced to its lake. The parallels are clever: highly specialized financial models and strategies cannot last in a complex, tightly-coupled market where change comes fast and furious. Although fine-tuning may yield short-term payoff, the inevitable result (2-3 years in Bookstaber’s observation) is extinction.
Instead, he advocates an investment strategy configured for the unknown. In addition, the strategist seeking to avoid the fate of the book cover’s Icarus should simplify organizational complexity and introduce slack when possible by decoupling processes. The take-aways are many, but as endogenous pressures continue to wreack havoc on the market, Bookstaber provides a powerful argument against increased innovation which only introduces more normal accidents.
If you liked The Black Swan or Fooled by Randomness, or want to better understand today’s economy, I cannot recommend this book enough.
I’m cleaning out my RSS feeds and finding some great stuff I had left to look at later. One of those was a post by Erik Hersman from way back in August about anonymity and trust online. He was puzzled by some comments made by Marissa Mayer, a senior Google executive, concerning how anonymity was an enemy of trust. 
Speaking at a conference, Mayer said,
“…I think it’s really important as we look at tools to think about how we can support fact checking, how can we guard against misinformation, how is there going to be established an element of authority and trustworthiness? …I grew up with the newspaper and the encyclopedia, which you could trust. And now you have blogs, which are held often as news and often aren’t factual. Or you have Wikipedia, which usually gets most things right, but there are a lot times there is vandalism or corrections that need to be made.”
“When you look at the elements of anonymity and the lack of accountability that happens on the web, it really does start to create doubt in the fibers of who can you trust… The physical world has been around a lot longer, and in the physical world you really can’t do anything anonymously. So when you look at systems online that break that paradigm where you can be completely anonymous, or be whoever you want to be, without any sense of history or of what you did last week, that’s not really reality and that breaks down the elements of trust and authority.”
I think there are a number of things wrong with these statements, including the points raised by Erick, that anonymity is an important defense against authoritarian governments. “Having these open, trusting, everyone-knows-everyone systems is all well and good when you live in the US. It’s not so good in other parts of the world.” I also think there are other problems.
The Premises are Wrong
Mayer has two premises which I think are flawed. The first is that “newspapers and the encyclopedia” are trustworthy. In my 19 years of experience though, I’ve seen that proven false time and time again. The New York Times was shown to be less than trustworthy thanks to Jayson Blair who fabricated and plagiarized stories. Broadcast news was shown to be less than trustworthy thanks to Rathergate. Even the Executive Branch of the government was proven to act and speak on falsities when Colin Powell spoke at the UN. Further, information has never been garnered solely from “trustworthy” sources; it comes from unverified and non-factchecked cocktail party conversations and grocery store gossip, too.
Secondly, the idea that you cannot be anonymous in the physical world is nonsense. It didn’t take the Internet to create anonymity. Sure, Bernstein and Woodward knew who Deepthroat was, but that is functionally no different than your ISP knowing who you are. And as for deciding “whoever you want to be, without any sense of history or what you did last week” only coming about with TCP/IP, that is innaccurate, too. Many a teenager reinvented himself at college and many an individual left town to start a new life. In fact, without pervasive communication technologies like the Internet, I think it is fair to say your history didn’t follow you as easily.
A False Dichotomy Between Anonymity and Trustworthiness
As for the substantive point, that anonymous discourse is inherently less trustworthy, I think it is lucky that this view isn’t true. Psuedonymity, which I view as persistent anonymity, allowed Hamilton, Madison and Jay to write the Federalist Papers under the psyedonym of “Publius.” American Revolutionary War pamphlateers were often anonymous, and countless whistleblowers, including those using WikiLeaks, have been able to inform the public via anonymous speech. As I said in a recent post, anonymity is essential for a free society.
The Supreme Court has recognized as much, saying
“Protections for anonymous speech are vital to democratic discourse. Allowing dissenters to shield their identities frees them to express critical, minority views . . . Anonymity is a shield from the tyranny of the majority. . . . It thus exemplifies the purpose behind the Bill of Rights, and of the First Amendment in particular: to protect unpopular individuals from retaliation . . . at the hand of an intolerant society.”
Anonymity can allow for even more trustworthiness, as in the case of election voting where booths and privacy increase our confidence that the voter chose without undue outside pressure.
Sure, anonymity has and continues to allow offensive, negative speech to flourish. But Mayer’s concern that anonymous online discourse drives its recipients away from engagement is less of a worry than chilling important speech by forced identity. Information, whether digital or physical and whether from anonymous or identified individuals, should always be verified and vetted. Unknown IP addresses have been wrong, but so has Dan Rather. I hope Google recognizes this and continues to allow online identities to run the spectrum of verifiability.
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