But, by-and-large, as an industry? We're doing squat.

It's almost as though publishers say, "Well, it has a graphical user interface that's supposed to be intuitive -- let 'em figure it out themselves."

The participants in the Founder's Conference -- 40 assorted newspaper executives and industry deep thinkers, well supplemented by academics and even a rock 'n' roll star (see the following story) -- were going on and on about these problems when I raised my hand. I asked:

"Why not get newspapers to tax themselves to pay for these things? You know, kind of a tithing situation."

Originally defined as a tax or levy of one-tenth of an individual's income or agricultural production paid to a church or its clergy, paying a tithe today is more likely to be a smaller amount, but the principle is the same. It's an agreement on the part of an individual to support his or her religion by promising a percentage of his or her income.

The problem with this suggestion at the Founder's Conference is that it landed with the dull thud that usually greets most of my spur-of-the-moment ideas. During the next break, though, one participant came up to me to say that despite the fact that nobody else seemed to like the idea, she did.

The participant was Prof. Jessica Korn, a Harvard-trained political scientist who is a 1997-98 Freedom Forum Fellow at the Media Studies Center in New York. Korn, who worked on the Telecommunications Act of 1996 while a Congressional Fellow in the office of Sen. Pete Domenici (R-N.M.), is an adjunct professor in the graduate business school at Columbia University. She is working on a book to be called The Plug and Play Economy with Peter Huber, a telecommunications expert and Forbes magazine columnist.

Korn's point was this: There is quite a bit of economic theory that lends credence to the tithing idea.

Say what? Somehow, a guy first hired in the newspaper business to write funny headlines had stumbled upon a legitimate economic theory.

What's the problem?
The underlying irritant here is that newspaper publishers are cheap.

Well, let me rephrase that: Newspaper publishers are so concerned with the bottom line that they are willing to cut corners in certain spending areas to make certain that they reach their profitability goals.

This really came home to me earlier this year at the Seybold-Cole Newspaper and New Media Seminar (see The Cole Papers, November 1997). There, Steve Nilan, a longtime marketing executive on the supplier side of the industry, threw out a large figure: Between 1989 and 1995, suppliers to the newspaper industry lost $400 million.

Ouch.

This number really brought home the reason that the industry hasn't provided us with the kind of technological innovation that we had come to expect during the previous five or six years. How can you spend money on research and development when you're losing money?

Of course, the early '90s were painful years for the newspaper industry. A recession began to sweep the nation in 1990 and effectively lasted 36 months. That damper on spending was immediately followed by a dramatic rise in the price of newsprint.

Nonetheless, much as the industry's leaders had not seen the newsprint price hikes coming, they did not see the folly in cutting back on capital investment in technology. Throughout the early part of the decade, system managers at newspapers across the country were told to "make do" with what was in place and that no major capital expenditures would be made.

This, of course, offered the implicit opportunity for "minor" capital expenditures, and that brought us to the world of placing inexpensive (relatively speaking) Macintoshes and personal computers around the building to perform various functions, ranging from the mundane (like allowing circulation to analyze data in a spreadsheet) to the ridiculous (like making up Page 1 in Quark XPress).

Sometimes these machines were actually expensed rather than capitalized. Either way, their users were never trained.

What many newspapers ended up with was a tangle of spaghetti-like wires that connected a bunch of machines together that nobody quite understood.

What should have happened? Anyone who had to touch one of these PCs for any reason should have been taught not only the basics of the machines, but the more advanced functions as well. In addition, line managers should have had the opportunity to make themselves proficient with PCs, so that they could support the workers who were using them.

Interestingly, this situation then dovetailed into the next problem: Frequently, the people who best understood PCs were new hires who had used PCs all their adult lives and didn't find them intimidating or complex.

The problem here, unfortunately, was that the people showing up for their first jobs had overall problems with other aspects of their education. They had difficulty writing, for example.

But the real problem isn't just the issue of poorer quality beginning workers, but the overall problem of the industry -- there are fewer and fewer journalism graduates going into daily newspapers.

The newspaper industry has a threefold crisis of commitment on its hands. It is not committed to research and development, or to internal training, or to reaching out and supporting secondary and post-secondary education.

Economic theory
After the Founder's Conference, Prof. Korn pointed me toward Prof. Paul Romer, who had articulated the notion of a national technology strategy through self-organizing industry investment boards in an article he wrote in a 1993 Brookings Institute paper.

Romer is about as sexy as economists get. He's been called the "Adam Smith of Silicon Valley," and Time magazine named him to its list of the country's 25 most influential people earlier this year.

His peers are also supportive.

"What Romer has ingeniously shown is that by incorporating technology into competitive equilibrium models, not only can growth rates increase over time but effects of small innovations and disturbances multiply over time," Richard Parker wrote in his 1993 article "Can Economists Save Economics?" in the American Prospect.

An economics professor in the graduate school of business at Stanford University, Romer is a proponent of what's called "new growth theory," which states that ideas infused with technology can create an unlimited economic growth engine.

"Old growth theory says we have to decide how to allocate scarce resources among alternative uses," Romer told Wired magazine in June 1996. "New growth theory says, 'Bullshit!' We're in this world, it's got some objects, sure, but it's got these ideas, too, and all that stuff about scarcity and price systems is just wrong.'"

A key piece to Romer's new growth theory is the notion that the ideas and the technology have to mix someplace. In the Brookings Institute paper, he suggested that the mixing pot be subsidized by industry investment boards.

Romer cites a number of precedents to his idea of industry investment boards, specifically the Agricultural Marketing Agreement Act of 1937, which provides for growers of agricultural commodities to band together to market their products better (the "Got Milk?" and California raisins advertising campaigns are examples of the impact of this act).

He also points to the telephone industry's Bell Labs, where before the break-up, each of the Bell Operating Companies paid a few percent of revenues to AT&T, which supported the Labs out of these payments. The Labs then created many of the important telecommunications advances of the 20th century, as well as providing much basic scientific research (including the invention of the transistor and the UNIX operating system).

Lastly, Romer cites the cable television industry's CableLabs, which collects a voluntary 2 cents per subscriber per month from cable operators to fund research on topics such as digital compression and digital signal transmission.

How it might work
Though Romer proposes enabling legislation similar to that of the Agricultural Marketing Agreement Act, there's no clear indication that such governmental action would be necessary.

Romer's hypothetical industry is widgets. He suggests that all widget makers agree that research and development needed to be done. Further, all the widget makers might agree on a specific amount of money to tax themselves -- their tithe. But how would the money be spent?

"You think, for example," Romer writes in the Brookings paper, "that university professors could be doing useful research on questions about the basic principles of widget design and manufacturing if they just had the funds and the incentive to do so. I believe that the upstream industry that manufactures widget-making equipment could be designing more useful specialized equipment."

How to resolve this conflict of opinion? Romer suggests that an industry have more than one investment board.

"You will take the initiative to organize an industry investment board that will fund university-based widget research," Romer wrote. "I will organize a board that supports the development of widget-making machinery in the upstream industry. Both of these boards will function as pass-throughs, accepting tax obligations from contributing firms and using these funds to support research in universities in the first case or development in upstream firms in the second."

These industry investment boards would be nonprofit foundations on which like-minded industry executives would sit. A company could devote its entire tithe to one board, or spread its spending over a variety of boards.

For the newspaper industry, I am suggesting a simple tithe: one percent of annual net revenues, to be split evenly between R&D, training and education. I figure this will come to about $450 million a year, or $150 million each for the three areas.

The R&D portion could certainly go toward industry investment boards such as those Romer proposed.

In terms of training, there are certainly established ways to spend that money. Whether it's sponsoring a worker at an established newspaper industry training facility (such as the aforementioned American Press Institute or the Poynter Institute in St. Petersburg, Fla.), or it's spending money with a job-specific training organization (such as companies that specialize in software training), the key would be only that publishers agree to spend that specific amount of money.

(Again, if publishers didn't like the existing facilities, there's nothing to prevent them from creating new training organizations or making donations to existing training organizations so they could broaden their scope.)

Finally, in the arena of secondary and post-secondary education, there are many ways to enhance that experience and sensitize students to our business:

What's it all mean?
It's all well and good for a newsletter editor to get on his soap box about the lack of industry research and development, training and education, but that means little.

What will be necessary is for publishers -- and that frequently means top publishing executives more than it means the person with the title "publisher" -- to get on the bandwagon. Though existing trade associations such as the Newspaper Association of America or the National Newspaper Association could facilitate the development of organizations similar to those discussed here, the real work is going to have to be done by the people who recognize that the crisis exists.

To facilitate the discussion and to get the ideas moving, we're going to open up an e-mail listserv dedicated to the topic. You can join the discussion by sending a message to macjordomo@colegroup.com with the words Subscribe Tithing Perry White (if you aren't Perry White, substitute your name) in the body of the message.

Maybe we can make something of this idea.

-- dmc

Economist Paul Romer's web site: http://www-leland.stanford.edu/~promer/