Thread by @mikemakowsky

YouTube is interesting to me because I think you can make a good case that it is a, in many ways, unique regulatory target, and one that lends itself to bespoke policy solutions. So here's a thread no one asked for w/ a punchline I didn't expect [1/16]

https://twitter.com/willwilkinson/status/1136356223396261888

YouTube is a network good w/ a high fixed costs, which means it's likely characterized by increasing returns to scale and decreasing avg costs. For those keeping score, that means it's a likely natural monopoly and the pro-regulation folks should be licking their chops [2]

But wait, there's more! You can also make a strong argument that it also enables significant amounts of "cultural pollution" i.e. hate speech, fear-mongering, conspiracy theories, etc. That's an externality! Even more reason for government to step in. [3]

Ideally the best way to internalize an externality is to tax it, but "cultural pollution" does not lend itself to a traditional tax setup because there's no way to measure its magnitude. Which means it's time to think about command+control solutions (i.e. hard regulation) [4]

If you want to regulate away an externality, and you can't tax it, then you better think really hard about the process that is generating the externality. So what's the actual problem at YouTube i.e. why are their private interests so misaligned with public interests? [5]

Key problem: YouTube doesn't sell ads, they sell "click-throughs". They aren't selling broad awareness of brands to the median person, they're selling selling *sufficiently intense content engagement to the kind of folks who click on web ads* [6]

So YouTube isn't offering the eyeballs of the median person, they're offering engaged interest off in the tails of the distribution. You think the "lowest common denominator" is scary? Pfft. Lowest common denominator gave us predictable sitcoms and Walter-Freaking-Cronkite. [7]

YouTube's revenue model has left them dependent on selling conspiracy books, doomsday prep, and how-to-make-money-at-home to the the folks sufficiently angry, paranoid, isolated, naive, or of lessened capacity that they'll dive down a rabbit hole and click an ad at the bottom [8]

That's why YouTube got rid of ISIS videos promptly, but alt-right hate speech and misogynist attacks persist: ISIS people aren't clicking on ads for reverse mortgages and boner pills, but your crazy uncle who refers to the previous President as a Kenyan socialist? He clicks. [9]

So what's the policy solution for a 1) Network Good, with 2) High-Fixed Costs that is *optimally* provided by a natural monopoly?

I submit we look to the British Broadcasting Corporation and Fannie Mae [10]

1) Grant YouTube legal monopoly status as a "Distributed Public Broadcasting Corporation" i.e. the DPBC
2) Nationalize 50% of YouTube (Class A shares), leaving Google with 50% of the shares (Class B shares). Only the Class A shares having voting rights.
Then... [11]

3) Auction off 40% of the government's shares to the public
4) Reimburse Google for the now established value of the shares previously taken.
5) All future profits will be paid out as quarterly dividends equally to both Class A and B share holders. [12]

Will the profits of the DPBC be less than YouTube's? Probably! The FCC will heavily moderate content to appease Congressional oversight, both requiring resources & eliminating profitable revenue sources. On the other hand, it's now a government protected monopoly! [13]

Google will make a mint off the share auction and that (IMHO) seems right. It's their company, we'd be "eminent domaining" them, and the auction should ensure they get ~"fair" market value for the expected future stream of profits sans "cultural polluting revenue". [14]

Of course, YouTube could massively police itself and change it's revenue model, but they haven't demonstrated any interest in that and, again, the unique externality they create does not lend itself to traditional tax+regulation tactics. [15]

TL;DR:
There's real reason to consider YouTube a genuinely unique "natural monopoly that produces an un-taxable externality", so maybe US taxpayers should just go ahead and buy them. [fin]

ADDENDUM: Nationalizations of companies are typically gratuitous acts of theft, w/ little in the way of exception. An eminent domain exercise of this scale requires a careful auction design, where the party in question is fairly compensated at a rate set by the true market

TL;DR the TL; DR: We should *BUY* YouTube, **not** nationalize YouTube.
Yeah, maybe semantics, but you know what? When you're talking about using the force of government to acquire a company someone else built, the least we can do buy it from them politely, if not fairly.