Perverse Incentives in the Attention Economy: It’s All About Increasing Advertising Revenue

The Attention Economy: Driving Large Tech Companies Toward Persuasive Technology Products

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Why this topic is important:

Henry David Thoreau said, “For every thousand hacking at the leaves of evil, there is one striking at the root.”

In order to solve any problem, you have to truly understand the problem. The degree to which you understand the actual root cause of a problem is the degree to which you will be able to effectively solve it at the root. If you understand the issue superficially, then your solutions will be superficial and short-lived. The problem will soon manifest itself again.

 “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” ― Sun Tzu, The Art of War

This interview offers a nuanced perspective in understanding the internet giants. It offers a must know view into their incentives and motives. In our efforts as parents, that viewpoint is critically important.

Interview summary:

The conversation centers around what I would call “the friction between our humanity and our technology”. There are a small number of very large technology companies that have overwhelming influence, little if any accountability, and a marketplace consisting of lined with perverse incentives.

The driving force behind most of today’s technology is the “capture of human attention” (what Tristan refers to as the “Attention Economy”). The typical path to capturing human attention is to engage users as often as possible for as long as possible regardless of other considerations. Large technology companies are big and getting bigger. They work relentlessly exploiting our human nature either intentionally or through random discovery and process of elimination. In either case, we arrive at the same dead-end, a manic drive toward capturing attention.

There were ideas proposed on how to change the current incentive structure. My purpose here is to inform parents about the dynamics of the current marketplace to allow us to act to defend our families.

Those of us with stewardship over children and adolescents must understand and be aware of the incentives driving the technologies we so blithely place in our kids’ hands.

Details:

My focus during the podcast was how the ideas discussed could benefit us as parents in our efforts to safeguard our children in the current digital world. With that perspective, the following are some of my thoughts, notes, and some direct quotes from the podcast discussion between Tim Ferris and Tristan Harris.

As parents, do we understand the incentives behind the largest technology companies? How do Facebook, Google, Instagram, and YouTube make money? If we understand what drives revenue and profitability for these companies, we will also understand their incentives. How their behavior affects individuals and families is a different discussion.

As a parent, the main themes that stood out in this podcast to me were:

  • The outsized influence of a small number of technology companies
  • The Attention Economy
  • Perverse Incentives

These are my notes from the podcast, supplementary data, and personal commentary:

The Outsized Influence of a Small Number of Technology Organizations

To put the power of the small set of elite technology companies in perspective:

That is a tremendously outsized influence, concentrated in a handful of companies, without any real accountability to their user base, and with minimal government regulation.

This elite group of tech companies have outsized influence in the internet marketplace and in the lives of individuals and families.

The Attention Economy

What is being bought and sold today is the users’ attention. The more engaging the products are, and the longer users are engaged, the more advertising that can be sold. Selling advertising is literally the bottom line.

The Attention Economy is the common thread throughout the interview.

Distraction goes hand-in-hand with the capture of attention. There were a couple of very interesting quotes from well-known authors. Below are longer versions of the quotes used.

In the book 1984, George Orwell describes a dystopian version of the future where “Big Brother” is always watching and invoking punishment and reward systems to control behavior.

Chuck Palahniuk from Lullaby: A Novel:

Old George Orwell got it backward. Big Brother isn’t watching. He’s singing and dancing. He’s pulling rabbits out of a hat. Big Brother’s busy holding your attention every moment you’re awake. He’s making sure you’re always distracted. He’s making sure you’re fully absorbed. He’s making sure your imagination withers. Until it’s as useful as your appendix. He’s making sure your attention is always filled. And this being fed, it’s worse than being watched. With the world always filling you, no one has to worry about what’s in your mind. With everyone’s imagination atrophied, no one will ever be a threat to the world.”

This next quote compares the dystopian futures pictured by Orwell in 1984 (Paid Link) and Aldous Huxley in Brave New World (Paid Link). This is an especially interesting comment and comparison.

Neil Postman  From Amusing Ourselves to Death: Public Discourse in the Age of Show Business

We were all told to keep an eye out for1984 [by George Orwell]. We thought the dystopia we would get would be the Big Brother one, but alongside Orwell’s dark vision, there was this older and slightly less well-known, but equally chilling vision, of Huxley’s Brave New World.”

“What Orwell feared were those who would ban books. What Huxley feared was that there would be no reason to ban a book, for there would be no one who wanted to read one. Orwell feared those who would deprive us of information. Huxley feared those who would give us so much that we would be reduced to passivity and egotism.

Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance. Orwell feared we would become a captive culture. Huxley feared we would become a trivial culture…

As Huxley remarked in Brave New World Revisited, the civil libertarians and rationalists, who are ever on the alert to oppose tyranny, “failed to take into account man’s almost infinite appetite for distractions.”

In 1984, people are controlled by inflicting pain. In Brave New World, they are controlled by inflicting pleasure. In short, Orwell feared that what we fear will ruin us. Huxley feared that our desire will ruin us.”

As a parent, I am not buying that there is some grand conspiracy. But these descriptions of unwelcomed futures where we have lost so much of our humanity and the richness of our relationships is what strikes a nerve.

Because the economics of the internet are now based on capturing human attention, those tactics and content that are most attention-grabbing are being exploited most egregiously. It turns out that human attention is most easily purchased with social media, games, sexually explicit content, conspiracy theories, fake news, and radicalized viewpoints and a few other themes.

Those most vulnerable to this attention capturing process are our kids. However, we as parents are also vulnerable to a lesser degree. Understanding and guarding ourselves against this onslaught is the first step in protecting our kids.

The companies competing for our attention each have what is called a “recommendation engine”. This is a computer program that builds as much of a profile as possible for each individual user based on available information and stored past behavior. The most powerful recommendation engines are owned by those with the most information about each individual. The purpose of these engines is to increase the number of visits and especially the duration of the visits. These are the two critical factors in driving revenue in the attention economy.

The recommendation engines of these large attention-harvesting tech companies are not focused on good or bad, right or wrong. They are only focused on winning in the attention marketplace. The machines only know what they are instructed to do which is to maximize the number and duration of user visits.

Perverse Incentives

Much like individuals, organizations are driven by incentives. As parents, we need to have a clear concept of what the incentives are so that we can defend our families from those that will damage the children for whom we have responsibility.

Currently, as shown earlier in the post, the largest two tech companies competing for our attention are Facebook (which owns Instagram, WhatsApp, and Oculus Virtual Reality) and Google (which owns YouTube, Android, Chrome, and hundreds of other tech companies). They are both publicly traded. Google (now Alphabet) debuted on August 19, 2004, at $85. Fifteen years later the stock was worth $1,200. In the 2018 fiscal year, Google received about 87% of its revenue from advertising and Facebook received 89% of revenue from advertising. Those numbers are driven by the expectations of investors to continue the highly lucrative practice of capturing and selling our attention.

Tristan said:

“And a race for attention is a race to get consequences, and you have to resonate at a deeper level than the other guys. And so, the game theory progresses so that you have to go deeper into social validation. You have to go deeper into self-worth. You have to go deeper into tribal warfare language. Just to first layout that these consequences are predictable and a direct consequence of that business model.”

Obviously, calling the incentives “perverse” is making a serious judgment call. That is not my wording but rather Tristan Harris’ word. This is capitalism at work, but this is not a post about the good or bad of capitalism. The perverse concept is especially true from the perspective of a parent. There is a small amount of lip service paid to being mindful of the effect on society at large, and our youth in particular, but generally the drive to capture and sell attention is the prevailing force at work in the attention economy.

Conclusion

For me, this was an engaging conversation between two people with deep roots in Silicon Valley and the tech industry. The main points I took away from this conversation as a parent and grandparent in the digital environment in which we currently live are these:

A small, elite group of tech companies have an outsized influence in the digital marketplace.

Not only is there a core group of very powerful companies vying for our attention, but they are rapidly growing organically as well as through acquisition. This necessarily increases the gravitational pull of their influence. I see no change to this scenario currently on the horizon.

The new economy is the attention economy.

Not long ago, tech companies generated profit by selling hardware and productivity software. In the new internet economy, the attention economy, the largest most financially successful companies sell advertising. Advertising on the internet is sold based on the number of users and the amount of time those users spend on a given website or engaged in a particular activity.

There is a perverse incentive structure that parents need to understand.

The result of those factors creates an overwhelming incentive for companies to make every effort to increase the number of users and the time each user spends engaged. These companies have a process, an engine, an algorithm, artificial intelligence or whatever name they choose to call it that profiles each individual user and analyzes their choices and behaviors to make recommendations to entice them to continue their engagement with the activity or website.

About Tristan Harris

Tristan Harris is one of the founders of the Center for Humane Technology whose stated goal is “We envision a world where technology supports our shared well-being, sense-making, democracy, and ability to tackle complex global challenges.” His bio states:

Called the “closest thing Silicon Valley has to a conscience” by The Atlantic magazine, Tristan was the former Design Ethicist at Google. He is a world expert on how technology steers us all, leaving Google to engage the issue publicly. Tristan spent over a decade understanding subtle psychological forces, from his childhood as a magician to working with the Stanford Persuasive Technology Lab, to his role as CEO of Apture, which was acquired by Google. He has been featured on 60 Minutes, TED, The Atlantic, the PBS News Hour, and more. He has worked with major technology CEOs and briefed Heads of State and other political leaders.

About Tim Ferriss

Tim Ferriss is one of the most listened to podcasters in the world currently coming in at #100 on the list of the Top 100 US Podcasts. According to the bio on his website, he has been listed as one of Fast Company’s “Most Innovative Business People” as well as Fortune’s “40 under 40”. He has published 5 #1 New York Times bestselling books. His first bestseller was “The 4-Hour Work Week” which has been translated into over 35 languages. He is also a prolific technology investor having invested in Uber, Shopify, Facebook, Alibaba, and many others.

Notes on the show from podcastnotes.com

Audio of the show

Transcript of the show

About the Author

Terry has been an entrepreneur in the IT industry for over30 years. Go here to read his complete personal story, “Husband, father, Grandfather and IT Executive.” If you want to send Terry a quick message visit the contact page Here.

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