Bret Piatt

If “Big Government” is more wasteful, less efficient, and generally just not a good idea why is “Big Business” more efficient, more profitable, and generally able to succeed without groundbreaking nimble new inventions?

So what do the failed “Big Businesses” have in common with the inefficient “Big Government”?  We have the “all in” style risk based bonus systems in the financial sector — this falls in both the accountability and corruption buckets.  Outside the financial sector we have many of the major corporations of the post-war era that have had to file bankrupcy due to lack of accountability over their workers because of the union shield.

Both of those paradigms exist in the federal government.  Elected representatives “know” if they take care of people they’ll get rewarded when they leave office.  This is similar to the financial sector problem as the represenatitive spends/takes risks with other people’s money and if it goes well stands to gain huge personal benefit.

On the other side of the coin the federal government is more unionized than any other industry.  Even non-union employees in government aren’t going to be eligible for performance related bonus plans.  Nobody is held accountable to perform above a baseline minimum, nobody is asked to do their best.

So how do we fix this?  The same way we fix other places where we have a lack of accountability and corruption.  Use existing laws or put better ones in place to enforce transparency and honesty.  Pushing the spending from federal down to state just spreads out the corruption, localizes it, and makes government less efficient overall for the same reasons small business is less efficient than big business.

Term limits don’t fix the “all in” mentality, they may perhaps make it worse as representatives know they have a short time to push through their “payday” legislation.  People that pass legislation need to be ineligible to recieve financial benefit from it.  This make may it very difficult to go from Congress back to the private sector but I’d rather pay them a congressional salary pension for life than encourage them to spend $100B of our money so they can get a $20M paycheck after they’re out of office.

The union issue is more complicated.  In a utopian society people would do their best each day regardless of an “incentive pay for performance” plan.  We sadly don’t live in utopia so people with no incentive often do the minimum required.  The best way to fix this is any job with a measured baseline of performance needs to be automated.  If it is too complicated to automate then people deserve some sort of performance incentive.  We don’t have to fix this overnight, let the current generation of workers finish out their careers and phase them out moving foward.

If we don’t address both accountability and corruption we will end up bankrupting our country.  In some states now people are paying > 50% of their income in “income tax” (NY and CA), start adding on property tax, sales tax, gas tax, and all of the other taxes and up to 2/3rds of some people’s earnings are going to taxes.  We also have some of the highest corporate tax rates in the world incenting businesses to evaluate opportunities to move to other nations.  Raising taxes isn’t the answer, we’re running out of room to do it — futher increases run the risk of decreasing federal revenues as income earners will look for opportunities elsewhere.

Right now Google is a “one trick pony” and eventually like Microsoft did with DOS and then Windows you saturate that market and can only grow at the pace of the industry.  The only way to have huge growth again is to find a new line of business.  For Microsoft it was and still is the Office suite (Word, Excel, PowerPoint, Access).  For Google it is going to be YouTube…

This isn’t going to happen over night but it isn’t much more than 5 years out.  Early adopters are already consuming Netflix through their Xbox360.  TV manufacturers are starting to include network adapters and PC manufactuers are shipping home theater studio PCs with remotes.  The next generation of home game systems will all be TV/Movie capable; Microsoft can already run the AT& U-Verse software on an Xbox360 (Microsoft is partnered with AT&T with the video delivery software).

So how does all of this help Google and YouTube?  Right now for TV+Broadband the consumer spends $80-200/month with the broadband component costing $20-80 leaving $60-120 for the TV content portion.  Broadband $/Mbit will continue to become more efficient allowing more and higher quality video to be delivered over it.

Time Warner Cable already sees this coming and they put new bandwidth caps on their broadband (5GB, 10GB, and max 40GB tiers) that limit their users to ~9 hours of HD quality video per month.  AT&T only offers their highest speed broadband bundled with TV service (you can get 6Mbps DSL for $35/month which is enough to deliver 1 HD stream).  Verizon offers their FiOS service with or without TV and for $69.99/month you get enough bandwidth to have 3 HD streams going at once.

So as long as the carriers providing the bandwidth don’t lock Google out they’ll be in the game for the TV portion of the revenue.  Right now all cable providers are limited to providing commercials based on service area — Google and YouTube can deliver commercials to each subscriber.  Google can cross reference your search information and base the commercials you see on that.  Because of this they can generate more $/commercial.  Imagine this — you searched earlier in the day for ‘new car’ and went to Ford, Audi, and BMW websites — now you’re watching the newest episode of “Super Show” on YouTube and Google can show you car commercials.

The TWC, Cox, Comcast group will fight this as hard as they can because they don’t have a carrier backbone so if you’re a traditional cable customer expect to see further limits like the one TWC has in testing in a few service areas now.  AT&T and Verizon are better off as they don’t need to pay transit fees for traffic from their subscribers across the Internet.

With mobile devices starting to become video capable Google is in the drivers seat here as well.  YouTube already works perfectly on my BlackBerry Bold and as mobile carriers move from 3G to 4G and battery technology makes huge strides (thanks to the investment coming from the automobile industry) many of us will be watching TV in the future on our phones.

What about Hulu? What about other video startups?  Just like Microsoft having the OS it was much easier for them to create a synergy and add the Office suite.  All of the pure video plays lack the dominance in search that give them the ability to better place relevant advertisement.

The TV advertising market in the US is between $50-60B annually.  Google can double their revenue by getting half the market share in TV advertising that they have in Internet search.  Android, cloud computing, business e-mail and office applications, and the rest of their current projects don’t have the potential that TV does.  They can be good profitable business units but Google’s route to the next major growth will or won’t happen based on their ability to execute with TV.