Content Matters

Innovate, Don’t Legislate

It’s an oft-repeated tale. An industry gets disrupted by upstarts with new technologies and business models. The incumbents act quickly – turning to their legal team for advice. Litigate and legislate and the typical responses that come back.

The approach to SOPA and PIPA is hardly new. We’ve seen this play out many times in many industries, most notably in the music recording industry. But in each case, the approach ultimately fails. Sure, it may slow the erosion of your business, but in the end a broken business model is still broken. And all of those efforts to solve the problem through legislative and legal efforts simply distract companies from focusing on what they really need to do, and often alienate your customers.

SOPA (and PIPA) are not the only current examples of this. The Research Works Act (H.R. 3699) recently introduced by Representative Carolyn Maloney (D-NY), aims to reverse the current public access policy under which any taxpayer-funded research is provided free of charge via the NIH website after 12 months.

The bill is being pushed by scientific journal publishers, who currently get a 12-month exclusive to sell the research in recognition of their efforts to coordinate the process of peer review.

My goal here is not to debate the specific merits of the Research Works Act nor those of PIPA and SOPA. Instead, I’d like to suggest a better way forward for publishers than relying on legislation and litigation. But before I do, I think it’s important to note that public policy or legal solutions are certainly appropriate in some instances.

My first job out of school was with a startup called Legi-Tech, a McClatchy-backed online service which tracked legislation. (This was, of course, in the pre-Internet days.) Legi-Tech soon faced a competitor – it turned out that the State of New York decided that providing access to legislative information on a subscription basis was an attractive opportunity for them as well. Fair enough – we believed we could certainly put out a better product than the State could. But the State, or its Legislative Bill Drafting Commission to be specific, went further. They made the full text of new bills available on their service 2-3 days before the printed copies were made available to the public – or to LegiTech, to provide through our service. We believed that violated the freedom-of-information act – they were giving preferred access to public information to those who paid them. So, we hired lawyers and filed suit. Eventually, we won a settlement. Eventually, while we won that battle, we lost the war and Legi-Tech ultimately was shuttered. But in this instance, litigation seemed proper. We were not looking to protect our own rights, but rather to fight unfair business practices of the state-owned entity.

In most cases, litigation and legislation are the wrong approach.

Rather than investing in lawyers, what if these companies invested their time and efforts into trying to identify the best possible experience for their users?

For example, with movies, it’s pretty straightforward. The “going to the movies” experience is very different than the “I’m tired – let’s stay in and watch a movie” experience. Yet, as Fred Wilson notes in his Scarcity is a Shitty Business Model post, the movie industry as a whole would make significantly more money if they would make new releases available in theaters, on DVD and streaming, globally on the same day. But, with the exception of some small indie movies who are experimenting, the industry refuses to adapt and loses out – to piracy, to video games and to other forms of entertainment.

For b2b content, it’s largely the same. Journal publishers seem concerned they will lose out on the one-off use. To me, this seems misguided. B2B publishers should look to get 80-90% of their revenue from their core markets. For journal publishers, this would include life sciences companies, universities and government agencies. Their focus should be on delivering the best solution to meet the workflow of those users – on desktops, tablets and other platforms. That's where they can maximize their revenue opportunities.

Yes, there will be light users who have an occasional need for their content. Aggregators can pick up some of that business – by making their content easy to find and by providing top-notch metadata, summaries and analyses, which will make those users’ jobs easier.  But the answer is not to make that content inaccessible via the public web.

A good example of this is the market for SEC filings. In the pre-Internet days, there were companies that made their living by Xeroxing copies of SEC filings and overnighting them to users. When the SEC decided to put their filings online via EDGAR, it could have been the death of these providers. Yet today there are a half-dozen or more filings providers (Thomson Reuters Disclosure, EDGAR Online,  ICC, Perfect Information, Morningstar) all finding their own niche in this competitive space. While the one-off user is typically happy with the free service from the SEC, the business user is happy to pay for better search and better access, embedded within their workflow.

And, of course, the digital music business provided great lessons for other industries. The music industry started out with an L&L (legislation and litigation) approach, but it failed pretty miserably. Users wanted a way to get all of their music onto the devices they used in their daily life, and the threat of lawsuits were not a major barrier. What changed the industry was iTunes. Once users had an easy and convenient way to buy music for their iPod most chose that path, abandoning the free downloads. Today, with iTunes, Amazon, Google Music, Rhapsody, Spotify, HypeMachine and others, there’s no reason for most to pirate music.

The organization with the biggest push behind SOPA/PIPA is, of course, the Motion Picture Association of America. This is the same organization that sued to stop the VCR in the 70s, saying it would kill the motion picture industry. Of course, DVDs (the successors to VHS) now account for a third of their revenue. This should come as no surprise. The CEO of the MPAA is former Senator Chris Dodd, who succeeded former Kennedy aide Jack Valenti. The day that the MPAA hires a product person to run them will be the day that industry changes.

Of course, there will always be the handful of users who will choose piracy. For the most part, these are users for whom their time is less valuable than money. And they’re not likely to buy your product regardless. It’s a lot like the market for counterfeit luxury goods. When my niece was around 10 years old, she wanted a Kate Spade handbag for Christmas. Luckily, the tabletop vendor near my office had them for $25. Now, lobbyists will claim that my purchase cost the real Kate Spade $300; but there’s zero chance I’d have bought her a real one, even if no counterfeits were available. As Tim O’Reilly eloquently notes:

The people who are pirating are most likely the people who would never give you a nickel to begin with. Piracy serves people on the fringes who are not being served adequately by legitimate markets. Frankly, if people in Romania can download my books and enjoy them, more power to them. They weren’t going to pay me anyway.

The pro-SOPA lobby puts forth estimates that piracy of digital media costs the US $200-250 Billion per year and an amazing 750,000 US jobs. Yet, all the calculations of losses are bogus, as noted above. The only real economic losses come around the fringes – where you have users willing to pay for a service but who choose to use an otherwise free or inexpensive version. And that $250 Billion figure? It’s made up. According to the Cato Institute’s Julian Sanchez:

The $200–250 billion number had originated in a 1991 sidebar in Forbes, but it was not a measurement of the cost of “piracy” to the U.S. economy. It was an unsourced estimate of the total size of the global market in counterfeit goods. Beyond the obvious fact that these numbers are decades old, counterfeiting of physical goods imported in bulk and sold by domestic retail distributors is, rather obviously, a totally different phenomenon with different policy implications from the problem of illicit individual consumer downloads of movies, music, and software. The 750,000 jobs number had originated in a 1986 speech (yes, 1986) by the secretary of commerce estimating that counterfeiting could cost the United States “anywhere from 130,000 to 750,000″ jobs. Nobody in the Commerce Department was able to identify where those figures had come from.

Now, let’s look at what most media companies have failed to do, while they’ve been fighting the legislation & litigation battles:

• They’ve failed to identify ways to leverage the changes in technology and media consumption to create new products for their core customers.
• They’ve failed (for the most part) to introduce compelling new mobile or tablet-based applications.
• They’ve largely failed to experiment with new business models, instead focusing on keeping the status quo.
• They’ve largely failed to embrace the technologies, tools and approaches (cloud, agile development) which the upstarts have used to displace them.

All in all, they’ve failed to create significant value-add that will give their customers no reason to ever consider the lesser, free alternatives and to reinforce the overall value of their brand.

Now, that’s not to condemn all media companies. There have certainly been sparks of innovation across all segments. But on the whole, publishers have been focusing a lot more energy on legislation and litigation than on innovation. And that’s a strategy that’s destined to fail.

Note: For those interested in more details on the Research Works Act, I’d suggest reading Michael Eisen’s blog post on the issue or this one from Scientific American.

Going Viral Does Not Constitute a Community

Last night, for an hour or two, most of our Twitter streams got overwhelmed with a meme called #LessAmbitiousMovies. It started with a tweet by Toronto artist @Rob_McCallum and spread virally, generating tens of thousands of tweets. The “game” was pretty simple – come up with a play on a movie title, and yielded results like Saving Private Benjamin or Last Tango in Parsippany.

That led to a Twitter debate this morning over whether that demonstrated that Twitter was a community, sparked by this All Things D blog post by @lizgannes. Her premise was that the meme Shows Twitter Can Still Be Community, Not Just a Tool".

My answer is that no, going viral does not constitute a community.  To me, a community consists of people with a common interest, interacting and/or sharing information around that interest. There are communities on Twitter – StockTwits is one that springs to mind, but there are other communities around health, sports and other areas. More importantly, there are many, many informal communities of users that spring up around numerous topics.  But that is quite different than a random group of people interacting around a viral meme.

While there were tens of thousands of tweets, there was only a modest level of retweeting. According to the Liz Gannes post, the most heavily RTd one was the clever Being John Stamos with 225 retweets. More importantly, it seems highly unlikely that any of those people will continue to interact with one another around this or any other meme going forward.

To me, #LessAmbitiousMovies is akin to people watching an awards show or the Super Bowl or all shouting “Happy New Year” at midnight.  Or perhaps trying the “Elf Yourself” viral marketing effort from Office Depot. There was common interest in a very general topic (humor) generating a lot of participation but little interaction and no sustained impact. Internet and Twitter memes are interesting but they don’t constitute a community.

Tears ran down my cheeks today

While this blog is generally focused on content and technology issues, I wanted to share a brief story from my day. While Congress fights over tax rates for the wealthy, this is a difficult year for many families.

Today I stopped at the main NY Post Office (33rd & 8th), headquarters to the USPS "Operation Santa Claus" program. I registered, then grabbed a stack of requests from children whose parents can't provide gifts this year. I'm not one to easily show my emotions, but I read letter after letter, with tears running down my face. If I could have, I'd have brought them all home. Here are a few letters that I chose.

Julianna, age 9, who lives with her mom, 2 sisters and a brother. Her mom works long hours to buy food and "Hannah Montana" clothing for her. Julianna is excited that they now live in an apartment, as they just got out of a shelter. Her request: "Santa, please give us clothes so my mommy will be happy."

I-Jae, age 8, who lives with her mom and her 4-year-old sister Irianna. She asks "Santa, this year my mother cannot buy us any gifts or clothes. Can you find it in your heart to help my mommy, since I lost my dad when I was 2 years old - he's with the angels"

11-year-old Carla asks just for a "pretty necklace or anything that an 11-year-old girl would like".

8-year-old Justin lives with his grandmother and his younger brother and sister. He's hoping for a transformer toy for himself, a Ben 10 toy for his brother and a baby barbie doll for his sister.

If you live in the NY area, I'd encourage you to stop by the main post office (33rd & 8th) and pick up a few letters. While it's gut-wrenching to read these, there's no better feeling in the world than knowing that you're brightening up Christmas for a kid who otherwise would have none. I can't imagine anything I could do this holiday that would make me feel better.

Here's the letter fromI-Jae in its entirety:

Password Security or How to Avoid Being Gawkered

The hacking of the Gawker comments database is a good wake-up call for those who’ve been somewhat lax in terms of password protection. In other words, pretty much of all of us.

As sites proliferate, we create more and more accounts. And while we know that it’s best to create a unique password for each site (preferably one avoiding words found in the dictionary), it’s not practical to remember dozens of random, unique codes.

Below I’ve provided some suggestions on how to tackle this problem. 

But first, I thought it might be helpful to share a copy of the email sent out by Gawker today, or as summed up by a friend, @media_maven who was a recipient, “Dear user: you’re fucked!”

Here’s the official version:

Subject: Gawker Comment Accounts Compromised -- Important

This weekend we discovered that Gawker Media's servers were compromised, resulting in a security breach at Lifehacker, Gizmodo, Gawker, Jezebel, io9, Jalopnik, Kotaku, Deadspin, and Fleshbot. As a result, the user name and password associated with your comment account were released on the internet. If you're a commenter on any of our sites, you probably have several questions.

We understand how important trust is on the internet, and we're deeply sorry for and embarrassed about this breach of security. Right now we are working around the clock to improve security moving forward. We're also committed to communicating openly and frequently with you to make sure you understand what has happened, how it may or may not affect you, and what we're doing to fix things.

This is what you should do immediately: Try to change your password in the Gawker Media Commenting System. If you used your Gawker Media password on any other web site, you should change the password on those sites as well, particularly if you used the same username or email with that site. To be safe, however, you should change the password on those accounts whether or not you were using the same username.

We're continually updating an FAQ (http://lifehac.kr/eUBjVf) with more information and will continue to do so in the coming days and weeks.

Gawker Media

For most of us, receiving an email like this will bring on a sense of immediate panic. Quick, off the top of your head, can you think of all the sites where you’ve registered with a password? Sure, the first 8-10 come to mind quickly, but after that, who knows?

For those affected by the Gawker breach, the immediate thing to do is identify the high-risk sites where you’ve used the same password as you did on the Gawker commenting system. Those include social media sites (Facebook, LinkedIn, Twitter, MySpace) plus other heavily used sites like gmail or Digg. I’d assume you don’t use the same password for financial accounts, but if you do, obviously change those first.

Next, change the password for any site where you might have entered credit card information (don’t forget Paypal).

Tackling those will eliminate the biggest risks. Now, it’s time to start thinking about a more bulletproof password policy, which will help you avoid this problem in the future.

First, at the risk of stating the obvious, your password should never be your first or last name (or, for crying out loud, “password”).

Next, you’ll want to come up with your core password(s). I’d recommend you have three levels of passwords.

1.       The most secure (banking, credit cards, etc) should be a non-obvious password. It should probably have at least 8 characters and some of those should be symbols rather than letters or numbers. Use a mix of upper and lower case (most, but not all sites are case-sensitive).

2.       A fairly secure password used for any ecommerce sites. I’d also use this for sites like Facebook, iTunes, Twitter, etc. where there is a potential negative impact to someone getting access. I’d also make this one 8+ characters and use at least one symbol.

3.       A third password for low-risk sites. These could be unpaid registrations for news sites, commenting sites (like Gawker) and any other site where you need an ID but never divulge valuable information.

Ok, now you’ve got three passwords, but you haven’t Gawker-proofed yourself.  If one of those sites is hacked, your password could be used at any of the others.

In this scenario, I’m using the following 3 passwords. I’ll use bands I like as the core, so I can more easily remember them. You can pick anything you'd like, but make it something not obvious to the casual visitor to your Facebook page, for example.

1.       !LouReed

2.       TheCl@sh

3.       Runaways

The next step is to add a unique character or two to each password based on the site where you’re registered. The easiest way to do this is to add a letter or two from the site name (or URL) to your secure password.

For example, using password2 for Facebook, it might be FaTheCl@sh. For LinkedIn, it could be LiTheCl@sh. For even greater security, insert the site-specific letters into the middle of the password. Or, rather than the first 2 letters of the site, take the last two in reverse order (“Ko” for Facebook, “Ni” for LinkedIn).

At this point, you should be able to create completely unique and difficult to hack passwords for each site, yet easily remember them.

The last step is designed to make sure you change the password frequently. It probably makes sense to change your passwords quarterly, at least for the high security sites. An easy way to do that is to change them at the start of each quarter. Add the number for the current month to the password.

So, if I were using password2 on Facebook, and it was the beginning of the second quarter, my password would be FaTheCl@sh4. In July, at the start of Q3, I’d change it to FaTheCl@sh7.

The last thing I’d suggest is to minimize the number of sites where you have to create a user ID. Visiting an eCommerce site that you’ve never used before (and don’t plan to use again)? Put away the credit card and use PayPal. That’s one less place holding your credit card info.  For commenting on blog sites like Gawker, many sites use third party platforms like Disqus or allow you to connect via Twitter’s oAuth. Use these approaches wherever possible (and I encourage blogging and news platforms to adopt them as well, rather than using proprietary comment systems).

Is this system impenetrable? Hardly. But like the camper being chased by the bear*, you don’t have to have the most secure password in the world. You just need yours to be more secure than most others, so it’s not worth the effort to hack yours.

(* for those who don’t know the joke, 2 campers are being chased by a bear. One says “quick, run up this hill”. The other responds “you’ll never outrun the bear”. The first responds “I don’t have to outrun the bear; I just have to outrun you”).

Of course, you’ll want to take this approach and tweak it to meet your own needs. My passwords don’t follow this precise format, but they use a similar variation.

What methods do you use?

Please Contribute: New Yorkers Without Summer Homes

OK, I borrowed the title concept from a comic (might have been Robert Klein but can't recall) who joked about setting up a foundation for New York Jews who didn't have a beach house. But that's the thought that popped into my head this morning as I read about Unithrive.org in the New York Times.

If you didn't read the article, entitled "I’m Going to Harvard. Will You Sponsor Me?", it describes what seems like a compelling program of peer-to-peer lending to students in need.

I'm a huge fan of peer lending and microlending programs. I've been a consistent supporter of Donor's Choose and am also a fan of Kiva. These programs bring transparency to the donation process and have demonstrated hugely impactful results. And I'm sure that Unithrive may provide similar benefits. But reading the article, you can't help but wonder how out of touch some of these people are.

I'll start with Unithive cofounder Joshua Kushner, quoted in the article as stating "I have friends who would spend 10 hours a week when they are not in class working at a coffee shop or in the dorms,” said Mr. Kushner, 24, referring to time that he considered wasteful. Josh is currently working at Goldman, Sachs and will soon be entering Harvard Business School.

Now, Josh may feel that working in a coffee shop or in the dorms is a waste of time. And I'm sure there are others who might agree. But, I disagree. I spent five nights a week tending bar for most of my college years. And while you can argue that I may not have learned a lot serving beers and shots at O'Heaney's, it tought me how to manage my time and to be accountable for all aspects of my student life.

Nor do I feel much support for Ricky Kuperman, a Harvard sophomore also interviewed in the article.  Ricky, a dancer, said in an interview that he wanted the $2,000 no-interest loan to visit Okinawa, Japan, in 2010 to spend time in the birthplace of karate. “If I don’t get the money, I will have to work longer next summer or during the term,” he said.“It will allow me to stay in shape and make getting cast in films or in dance projects that much more possible.”

These may all be wonderful opportunities, but they come off more than a bit tone-deaf, particularly in the current environment. College isn't necessarily about leading a privileged life where you can focus all your efforts on academics and adventure. College is about preparing for adulthood. It's about learning to live with others. It's about learning to make concessions and to work hard for the things that you want. The college years are also a great time to learn about real life - perhaps working at that coffee shop, Josh's friends might have the chance to meet a single mother who uses that job to put food on the table for her family. Perhaps it provides a dose of reality that Josh is unlikely to get at HBS or at Goldman.

My daughter is still a few years away from being ready for college. And while I don't want her to have to work five nights per week, I do want her to work during college, so that she continues to develop the values which will guide her adult life.

I have friends who had to take time off in the middle of college to earn enough money so they could finish up a year or two later. And I'd be happy to participate in a peer-lending program to help students be able to afford their tuition or rent. But sending a young person on a trip to the birthplace of karate or backpacking across Europe? Sorry, I'll direct my funds to Kiva or DonorsChoose in that case.

(Josh Kushner photo sourced from Gawker)

Conde Nast Portfolio - Sorry to See You Go

There was a tremendous amount of coverage today of the announcement that Conde Nast would soon be shuttering its Portfolio magazine.

In fact, Portfolio had not received this much ink since the news two years ago that Conde Nast planned to make a nine-figure investment in the launch of a new print product, a decision that seemed audacious, even at the time.

Others closer to the magazine business have shared their thoughts on why Portfolio failed, so I won't dwell on that part of the story. Here are a few of those comments:

Jon Fine goes back to the basics saying that Portfolio failed to engage either readers or advertisers and had the unfortunate timing to attract neither during a huge advertising contraction.

Jim Ledbetter at the Big Money, who knows a thing or two about launching a financial content product during a down market, suggests that with a smaller budget, a weekly frequency, a better website and a better editor, Portfolio might have been able to survive, had market conditions been better.

But I look at the Portfolio shutdown simply from the standpoint of a reader. I don't read a lot of magazines; in fact, Portfolio is the only consumer magazine to which I currently subscribe. I get most of my news from the web, either on my desktop or iPhone and most printed publications just seem stale by the time I read them (yes, that even applies to the New York Times I read on the subway each morning). So I certainly did not look to Portfolio for breaking news. But sometimes, you want the long form story, the kind you can get from The Economist, the New Yorker, Vanity Fair and, yes, Portfolio.

I viewed Portfolio simply as pleasure reading. During its first summer, I found it to be the perfect poolside reading material. During the summer of 2007, when ad dollars were still plentiful, Portfolio had "plop value" that could compare to the weighty fashion magazines my wife would read. Portfolio hired talented writers and delivered solid investigative reporting. While many skewered Portfolio for putting Sarah Palin on the cover of its April issue, I found the Joe McGinniss article, which described how Palin's dealings with the oil companies would ensure that the $40 Billion natural gas pipeline would never be built, to be top notch.

And, of course, Portfolio hired a terrific team of bloggers, led by Felix Salmon, now at Reuters. While the print product was always more of a guilty pleasure, Felix's Market Movers blog was on my daily "must read" list.

I'm not a magazine reader and if I were to start up a new content business today, it wouldn't be in print and it wouldn't have a $100M launch (or a $10M or probably even a $1M launch). But, this summer, when I'm lounging by the pool, I'm going to miss Conde Nast Portfolio.

Help Send Deserving Kids to Camp this Summer

As the economy continues to decline, the nonprofit sector is taking a big hit. State and municipal funds have dried up, foundations are struggling with poor investment returns and many of the big individual donors are worried about keeping their jobs.

Luckily, there are lots of ways that each of us can make a small difference. Social media and micro-donations make the process even easier.

Edelman and a few other organizations in the Chicago area are supporting the Off the Street Club (OTSC), which provides inner city kids with a summer of swimming, horseback riding and cookouts at Camp Mathieu.

So, please take a minute and make a modest donation - even $5 makes a real difference. You can donate using the ChipIn widget below (see, I told you this used social media tools).

Not sure? Visit their Facebook page and watch the brief 2 minute video.

PS - for those who were at the SIIA Twitter panel on Wednesday, this program is part of the Friday $5 Twitter Challenge from Amanda Mooney, the Edelman social media maven I mentioned.

Stephen Colbert, Gates Foundation Team to Support Donors Choose

I spent my morning in the auditorium at Manhattan Bridges High School in Hell's Kitchen.

It was there that Stephen Colbert, along with representatives of the Bill & Melinda Gates Foundation came together to announce a $4.1 million grant to Donors Choose.

The "Double Your Impact" program will provide half the dollars to fund an expected 17,000 projects, which will touch 300,000 students. Qualifying projects will focus on college readiness.

Stephen Colbert, who was recently named to the board of Donors Choose, served as moderator of the event, with a panel consisting of Donors Choose Founder and CEO Charles Best, Gates Foundation director of education Vicki Phillips and Elizabeth Smith, a teacher at Manhattan Bridges, who twice has had projects funded through Donors Choose.

Donors Choose is an amazing organization. Founder Charles Best, a former Bronx social studies teacher  came up with the concept in conjunction with his students. To-date, the program has funded more than 80,000 projects, impacting more than 2 million students in all 50 states.

Donors Choose blends the concept of micro-donations with transparency, control and accountability. It's an amazing model and it's a model for individual philanthropy. To explore the projects currently seeking funding, visit Donors Choose.

I caught up with founder Charles Best for a few minutes at the end of the event.

 

Where Might the Best and Brightest Go to Work?

The New York Times today has an article entitled Crisis Reshaping Wall Street as Big Banks Lose Top Talent, which spotlights the decisions some on Wall Street are making to leave the big investment banks..

This is a discussion I've been having with friends (both online and off) for much of the past year.

For those in the New York technology industry, the financial markets have been both boon and bane. They create a strong market to sell into, but they also make it much harder (and more expensive) for startups to recruit technology talent. In Silicon Valley, the decisions are between startups or the former startups who've grown up a bit. In Silicon Alley, we've had to compete with Goldman, Morgan Stanley and others who offer salaries and benefits with which startups are unable to compete.

Of course, it's not just IT and MBA students who go to Wall Street. For more than 20 years, the top graduates of law schools and various undergrad and graduate school programs have been recruited by the top investment banks.

So, if there is a shift, is that a bad thing? Personally, I think it will be healthy for the Street and certainly for other industries.

If I were starting my career today, finance would not be near the top of my list. There are so many fields undergoing transformational change where young people can make a huge impact, such as health care, energy or technology. For those who love finance, there are great opportunities with smaller firms where entrepreneurial skills can be applied. And, of course, there are public sector roles where the smart young leaders can help reshape our society.

What would be the negative impact of a brain drain on Wall Street? I think the Street can survive without the invention of new financial instruments for a few years. Meanwhile, getting the best and brightest to focus on solving the challenges of energy, healthcare, infrastructure and information technology will have a big positive impact on society.

The Federal Government Behaving as a Private Investor Might

I've been amused by all the outrage over the government's recent actions related to the AIG bonuses and now its apparent role in the resignation of Rick Wagoner at GM. Tonight on the news networks there are various people being interviewed, expressing indignity over the possibility that the White House had made Wagoner's resignation a criteria for another bailout.

GM has a current market cap of slightly north of $2 billion. Taxpayers recently put $13 billion into GM and are on the verge of providing another $12 billion in loans to the troubled automaker.

Last week there was similar feigned outrage by many that the government would try to restructure or otherwise limit the bonuses that had been awarded by AIG. "If the government fails to meet contractual obligations, it will lose the confidence of everyone" was the party line for many big-business conservatives and many on Wall Street. This after putting more than $150 billion into a company which could today be bought outright for less than $3 billion.

If it weren't so difficult politically, the right thing for the government to do might have been to purchase GM and AIG outright; combined it would cost about $5 billion (less, if it had been done a while ago). But true nationalization is not politically tenable, at least for now.

But let's pretend for a moment that, rather than the White House, it was a private equity firm doing the acquisitions. Let's call them WH Partners LLC. Would there be any cries from either side about the aggressive actions WH Partners was taking?

Hmmm. Let's start with GM. Once WH Partners wrote the check and closed the deal, would anyone suggest they had no right to install their own CEO? Did anyone make that argument when Cerberus put Nardelli in charge of Chrysler? While some questioned whether he was the right guy, I don't recall anyone saying Cerberus had no right to make the change.

Now, let's take a look at AIG and whether the government might have had the right to change the terms of the retention bonuses. Well, in the private sector, that happens all the time. Many of the firms who complained that this would be unfair are the same firms which have done advisory work that allows, for example, Company A to do an asset acquisition of Company B which would avoid it having to pay out retiree benefits (the Halliburton acquisition of Dresser Industries is one such case that I recall). Now, I'm not suggesting that WH Partners should, in this case, strike the bonus deals outright, but I might encourage them to restructure the deal to reflect the current situation. Perhaps instead of a lump-sum bonus, the bonus might be paid over a multi-year period and be tied to specific performance goals.

Look, no one wants the federal government to be making hiring decisions nor to set compensation plans for the private sector. But when failed companies seem unwilling to make changes themselves and turn to the government for bailouts, they should expect a bit of oversight to come with the check. And I for one am happy to see this administration place at least some controls on the companies we're bailing out.

What do you think?