Opinion L.A.

Observations and provocations
from The Times' Opinion staff

Category: Technology

Excuse me, my tattoo is ringing

Vibrating tattoo illustration
Meet Nokia, the king of synergy.

Many young people today seem to covet two things -- smartphones and tattoos. So Nokia has filed a patent for, as my colleague Deborah Netburn writes, "a tattoo that would send 'a perceivable impulse' to your skin whenever someone tried to contact you on the phone."

And you thought those Bluetooth things stuck in people's ears were silly!

Still, coming on the heels of a report that Apple sold more than 3 million new iPads in the first three days of its release, I'm not about to rain on a company's technology parade.

So how would this "tattoo ringer" work?

According to the patent filed with the United States Patent and Trademark Office, the phone would communicate with the tattoo through magnetic waves. The phone would emit magnetic waves and the tattoo would act as a receiver. When the waves hit the tattoo, it would set off a tactile response in the user's skin.

The patent also suggests that it would be possible to customize the physical response depending on who is calling -- similar to having a different ring tone for different family members. So if your husband calls, you might only feel a dull tingling, but if it's your teenage daughter calling you'd feel a mighty itch.

Isn't technology great?  I can envision the future:  The whole family stops at the smartphone store, then troops next door to the tattoo parlor for customized "tattoo ringtones." 

Or more likely, the tattoo artist will be right there in the smartphone store. Heck, maybe it'll even be a robot tattoo artist.  How cool would that be? You pick a tattoo from a screen, press a button and presto, off with your shirt and on with your tattoo.

I'm sure apps will be written to take advantage of this; there's an app for most everything now. Perhaps you'll be able to download the app to your phone and it would instruct little brother in how to tattoo a ringtone.

Maybe there will be ringtone tattoo parties.

Yes, in this brave new world, a tattoo that says "Mom" will mean just that: Mom calling.

Of course, there are obstacles.  Girlfriends and boyfriends come and go, as do husbands and wives. So, I'd advise caution: Stay away from "I love Kate" or "My sweet Phil" tattoos. 

Something generic, perhaps. Like "I love her/him."

Yes. That has a certain ring to it, I'd say.


 Peyton Manning, Zeus of QBs in a football-mad nation

Save the incredible sinking, leaning Washington Monument

The test-tube babies testing the limits of survivor benefits 

--Paul Whitefield

Photo: Nokia's patent for a vibrating tattoo. Credit: U.S. Patent and Trademark Office

Be afraid: Robot experts say machines are catching up

Sky Captain robot at Comic-Con 2004A panel of robotics experts at the South by Southwest conference couldn't reach a consensus Tuesday on whether machines would soon take over the Earth. But they agreed that the advances in artificial intelligence are well-nigh unstoppable. In fact, they said, machines are already demonstrating the ability to learn and to solve problems that humans couldn't.

The discussion was seasoned with more than a dash of whimsy, and like much of what goes on at South by Southwest, it was closer to a brainstorming session than an academic presentation. Nevertheless, the speakers offered enough anecdotal evidence to make their visions of the future compelling, if not necessarily prescient.

Two of the three -- Daniel Wilson and William Hertling -- are authors of novels about apocalyptic conflicts between machines and humans, so their comments need to be taken with a grain of salt. The third -- Chris Robson, founder of the data analysis firm Parametric Marketing -- wasn't promoting any books, just an (ahem) unconventional point of view about the nature of human consciousness.

The idea of a robot coup d'etat is based on the sci-fi notion of "technological singularity" -- the point where machines become powerful enough to improve their own instruction sets and capabilities without human intervention, leading to a runaway chain of self-upgrades that surpasses human comprehension. And Wilson, for one, is not a believer.

Smart machines like IBM's Watson supercomputer aren't the product of some magical breakthrough, but of a lot of separate research efforts that solved individual problems. Because progress toward singularity is iterative, Wilson said, "we'll have time to deal with potential unforeseen circumstances."

Hertling wasn't so sanguine. The rapidly advancing power of microchips means that machines with far fewer chips will be able to perform Watson-like feats. Combine that with some open-source artificial-intelligence software toolkits, he said, and hobbyists will join scientists in writing "crowdsourced" solutions to the technical problems involved.

Noting that cats have about 10% of the brainpower of the average human, Hertling offered the audience a milestone for anticipating the arrival of the singularity. "If you see a robotic cat wandering down the street, we're about 10 years from human level AI," he said, adding, "That's the point when I'm grabbing my kids and heading for the hills."

Robson went even further. Smart machines are already designing the chips that are paving the way for ever smarter machines. And there's already smart software online -- such as "tradebots" built to generate profits on Wall Street -- and self-replicating programs can interact with machines -- such as the Stuxnet virus that reportedly tracked down and attacked some of the centrifuges Iran was using to enrich uranium. Put those things together, Robson warned, and you could produce a tradebot that shorted airline stocks, then directed viruses to cause planes to crash.

But why assume that advancing machine intelligence will eventually lead to a Terminator-style future, where robots try to kill off their human overlords? Hertling said it's easy to see smart machines concluding that humans are a threat to the planet they live on, or that the warlike nature of man makes a preemptive strike a robot's best defense. His own fiction, however, finds a happier ending, with machines concluding that they need humans just to keep generating the power they need to operate.

A more interesting question is whether the increasing intelligence of machines and the simulation of personality (hello, Siri!) creates a moral imperative to treat them well. Robson went the furthest on that point, saying: "I know of no scientific reason why AI machines can't have the same kind of consciousness as we have... I see no scientific reason why machines can't suffer."

Wilson said that people are going to start interacting in their daily lives with machines that look increasingly like living creatures. Such machines "should have moral rights, but only in so far as it affects human beings." It's OK to destroy a toaster, he said, but harming a robot that looks like a puppy might breed sociopathic behavior.

As for the future, Wilson said, "There's no stopping this train we're on." The people who are building technology try to assure its safety, "but there's no way to cover all your bases there." Nevertheless, he argued that the best course is to keep building technology and continue expanding our own capabilities with it.

Robson, on the other hand, said, "I'm filling my bunker at home with good quality scotch, and I would advise everyone else to do the same." Noting how "stunningly successful" humans have been in controlling spam and viruses, he warned, "We are very, very vulnerable at the moment."


Mary Brown: "Obamacare" foe, and broke

Red meat will kill you? Stick a fork in me, I'm done

Al Gore and Sean Parker call for "Occupy Washington"

-- Jon Healey

Credit: Denis Poroy / Associated Press

Sherwood Rowland, the scientist who saved the world

F. Sherwood Rowland
It's not often you can say that someone saved the world -- and mean it literally.

But that's the case with F. Sherwood Rowland. The UC Irvine chemist, who died Saturday at 85, was one of three scientists who won the 1995 Nobel Prize in chemistry, The Times reported, for their work "explaining how chlorofluorocarbons, ubiquitous substances once used in an array of products from spray deodorant to industrial solvents, could destroy the ozone layer, the protective atmospheric blanket that screens out many of the sun's harmful ultraviolet rays."

In hindsight, it seems straightforward: Bad stuff was eating away a vital part of Earth's environment. So get rid of it.

But it wasn't so simple in 1974, when Rowland and fellow scientist Mario Molina published their concerns in the journal Nature.

As The Times says, the findings "were met with scorn by the chemical industry and even by many scholars. For a decade, Rowland and Molina persevered to prove their hypothesis, publishing numerous scientific papers and speaking to sometimes hostile audiences at scientific conferences. It took almost 15 years for the international scientific community and chemical industry to accept the pair's findings."

Hmmm, starting to remind you of a little something called "climate change," is it?

But here's something of a vital difference between the ozone debate and the current climate change one:

Manufacturers began to phase out chlorofluorocarbons in the late 1980s, prompted by the discovery of an ozone "hole" over Antarctica that formed each winter in response to weather conditions and the falling worldwide levels of ozone. The Montreal Protocol, a landmark international agreement to phase out CFC products, was signed by the United States and other nations in 1987.

The protocol was proof that nations could unite to address common environmental threats, Rowland contended. "People have worked together to solve the problem," he said.

Rowland was right then.  Nations did unite to address a common environmental threat.

But have we taken that lesson to heart?  Will we accept the scientific consensus on climate change and work together to save the planet?   

Or will it continue to be a political football, at least in the United States, where too many politicians are opting for short-term partisan gains at the risk of the planet's future?

Donald Blake, a colleague of Rowland’s at UC Irvine, told The Times that Rowland considered the phase-out of CFCs his greatest achievement.

It would be a shame if Rowland won the ozone battle -- but the rest of us lost the war for Earth’s survival.


Is that a fracking earthquake?

Japan's 1,000-year-old warning

'Obamacare' plaintiff Brown's bankruptcy: Instant karma? 

--Paul Whitefield

Photo: F. Sherwood Rowland, shown in his UC Irvine lab.  Credit: Rick Loomis / Los Angeles Times

The CEO for Silicon Valley's CEOs

Carl Guardino
Carl Guardino is a CEO, but perhaps like no other -- head of a group of more than 350 CEOs. That may not sound out of the ordinary, but these CEOs head some of the most important companies in Silicon Valley.

In a place where the really important people are in "cutoffs and flip-flops," Guardino is the guy in the suit, the guy with a degree in political science -- "the only true science" -- not in engineering.

But he grew up in Silicon Valley when the area was still the "Valley of Heart's Delight" and full of orchards, not start-ups. The Silicon Valley Leadership Group he heads is a business organization like few others. It endorses many business-friendly reforms in governance and tax matters, but it is also committed, like its founder David Packard of Hewlett-Packard, to making Silicon Valley livable for the have-nots as well as the super-haves. His board members are on board with measures that put housing and transit within reach for teachers and police officers and firefighters and waitresses and car repair shop employees who live and work there too. "The fabric of the valley," he says, "is contingent on all of those people's success."

Silicon Valley is a model many other places would like to copy. "A friend once designed a map of the U.S. called 'the Siliconia of the United States,' all the regions wanting to capture the magic and imagination [of] Silicon Valley." To make that happen, says Guardino, those places too will have to care about the quality-of-life issues for all of the local population, not just the CEOs' employees.


Patt Morrison Asks:Carl Guardino, Silicon Valley's big wheel

Patt Morrison Asks:Tiffany Shlain, wired in

Patt Morrison Asks:The Internet Archive's Brewster Kahle

-- Patt Morrison

Photo: Carl Guardino talks with reporters after meeting with Gov. Jerry Brown in March 2011. Credit: Rich Pedroncelli / Associated Press

Broadcasters sue to stop another online TV service

That didn't take long.

Eight television networks and local broadcasters in New York filed suit Thursday against Aereo, a company that announced plans two weeks ago to deliver live local television programming online. The lawsuit seeks to block Aereo from launching its service, which it had planned to do this month.

Formerly known as Bamboom, Aereo hoped to offer a low-cost alternative to cable to people who can't tune in local broadcasts reliably through an antenna, or who want to watch those programs on a mobile device. For $12 a month, it planned to offer New Yorkers the ability to watch or record local stations' telecasts on their Internet-connected computers or smartphones. That's a service many broadcasters hope to deliver themselves.

The broadcasters' lawsuit, which came as no real surprise, alleges that such retransmissions violate their copyrights. It's essentially the same argument that the industry has used to shut down other services that moved free over-the-air TV onto the Internet without licenses from the copyright owners.

Aereo's approach has a unique wrinkle, though: Instead of selling its customers channels of programming, it rents each of them one of the many tiny antennas it has set up to tune in the local stations. It also rents them the equipment needed to record, store and transmit the programs to their homes.

This approach is designed to take advantage of a U.S. 2nd Circuit Court of Appeals ruling that upheld an unconventional video recording service offered by Cablevision. Instead of renting out digital video recorders, Cablevision equipped its customers to share recording and storage equipment in its central office. The court ruled that as long as individual customers were making separate recordings for their own viewing, it didn't matter that the recording equipment wasn't in their homes.

That concept stretches only so far, however. Another company that relied on the Cablevision decision, Zediva, tried to offer a Netflix-like online video-on-demand service without obtaining licenses from the movie studios. Zediva enabled subscribers to play discs from a bank of Internet-connected DVD players, which streamed the movies to them online. But a federal judge in Los Angeles ruled last year that the arrangement infringed on the studios' copyrights and ordered the company to shut it down.

The broadcasters' lawsuit against Aereo similarly dismisses the company's attempt to work around copyrights by using sophisticated technology:

It simply does not matter whether Aereo uses one big antenna to receive plaintiffs' broadcasts and retransmit them to subscribers, or "tons" of "tiny" antennas, as Aereo claims it does. No amount of technological gimmickry by Aereo -- or claims that it is simply providing a set of sophisticated "rabbit ears" -- changes the fundamental principle of copyright law that those who wish to retransmit plaintiffs' broadcasts may do so only with plaintiffs' authority. Simply put, Aereo is an unauthorized Internet delivery service that is receiving, converting and retransmitting broadcast signals to its subscribers for a fee.

Naturally, Aereo would characterize its service as a technology akin to a VCR or a TiVo that lets people shift the format and the timing of over-the-air programming. If the technology were sold as a product and installed in customers' homes, there seems little question that it would be legal. It's not, however, which means the two sides will be fighting in court over the boundaries of the Cablevision ruling.


LACMA's $10 million rock

Will Santa Monica call off Christmas in the park?

Americans leave Egypt, but not without money changing hands

-- Jon Healey

Photo: An array of Aereo antennas, each of them roughly the size of a dime. Credit: Aereo Inc.

Rearview cameras on cars by 2014? It's so 21st century

Honda Crosstour rearview camera

Forget healthcare reform's "individual mandate." Now the government is looking to take away your right to back into stuff with your own car.

That's right: The National Highway Traffic Safety Administration is proposing that by 2014 all new cars sold in the United States have rearview cameras.

Now, full disclosure: In four decades of driving, I personally have backed into one car, one pole and the side porch of my house -- twice. (In my defense, none of this happened until the kids came along and I had to buy that stupid minivan!) And showing that the apple doesn't fall far from the tree, my teenage son's first, and only -- so far -- accident came when he backed into an iron railing. (I'm so proud!)

And, as The Times story Tuesday said:

Each year, 228 people die after being struck by passenger vehicles going in reverse -- including about two children a week, according to the New York Times.

Accidents caused by drivers backing up also injure 17,000 people annually.

Plus the cost to automakers of the rearview cameras, now found on fewer than half of 2012's cars, isn't prohibitive: about $160 to $200 for each car.

So, on balance, I count this rule as a good thing -- for the nation and individually.

(Although I must confess that when I rented a car a few years back with a rearview camera, the kids couldn't resist taking turns checking themselves out on the dashboard screen. Which both seemed to defeat the purpose of the camera and led to a severe scolding by their mother.)

What's most interesting about this, though, has been the sea change in attitude among Americans about cars and safety. 

When seat belts were introduced in the late 1950s, for example, the U.S. auto industry resisted efforts to make them mandatory, arguing that people didn’t want them -- as evidenced by the fact that, when they were offered as extra-cost options, few people ordered them.

Thankfully, automakers lost that fight. But for quite some time, many people also resisted state laws requiring the wearing of seat belts.

Airbags were also controversial when mandated, with automakers arguing, again, about cost, and with others doubting the claim that they would improve passenger safety.

But somewhere along the way, Americans went from penny-pinching, throw-caution-to-the-wind, I'll-die-a-gruesome-death-behind-the-wheel-if-I-want-to rugged individualists to consumers of safety at all costs. (See the silly "Baby on Board" phenomenon.)

Now, the more airbags the merrier. Cars have collapsible steering columns, anti-lock brakes, safety glass, crush zones, reinforced doors and roofs, and loads of other safety features.

Sure, we still sometimes show vestiges of our wicked past: People -- very unsafely -- call and/or text while driving, for example.

But for the most part, we embrace all the new gadgetry.  And safety now sells. So automakers bring us more of it.

For example, as The Times story says:

Automakers unveiled an assortment of other preventative safety features at the L.A. Auto Show in November.

Infiniti showed off its backup collision intervention technology, which not only beeps when its sensors detect potential obstacles but also automatically brakes to avoid a crash.

A similar function from Ford offers blind-spot warnings. Cadillac has a virtual bumper feature that stops the car before it hits anything.

That's right: Soon your car may do more of the driving -- and the accident avoidance -- than you do.

The bright side of that equation? You may be able to call or text in complete safety.

"Passive Driver on Board," anyone?


Volkswagen's wooly Bulli

High-tech cars -- and equally high-tech security issues 

New cars vs. old cars -- the 'old paint' economic indicator

-- Paul Whitefield

Photo: The dashboard of the Honda Crosstour features a rearview camera and monitor that are used when the car is backing up. Credit: Genaro Molina / Los Angeles Times

Gotta get some Google Goggles

Google Goggles illustration

You know what's so great about the world we live in?  It's that there are people out there right now inventing stuff you don't even realize you need.

Take Google. Its Google X lab is reportedly hard at work developing Google Goggles.

Despite the tongue-twister name, Google Goggles will apparently be the next must-have gadget. The so-called smart glasses (gee, who knew that regular glasses were "dumb"?) would somehow connect with the Internet to relay information in a heads-up display. (Shhhh. No one tell Rick Santorum. He'll want to pass a law banning Google Goggles. He thinks God gave us "eyes" for this sort of thing.)

Actually, Google Goggles remind me of Segways. You know, those really cool, high-tech scooters that relieve users of the chore of "walking"?

Anyway, here's what The Times said Wednesday about Google's latest ploy, er, toy:

Google Goggles uses photos, rather than text or voice, to conduct Web searches that can identify artwork, books, albums, contact information from a business card, logos, landmarks, wine bottles and even text to translate.

The experience offered by the glasses would be "Terminator-style" and would display information "based on preferences, location and Google's information," 9to5Google reported.

"The glasses will have a low-resolution built-in camera that will be able to monitor the world in real time and overlay information about locations, surrounding buildings and friends who might be nearby," the New York Times reported. Google intends that users not wear the glasses all the time, but only as needed, the report said.

Uh huh: "Only as needed." Not like that's a slippery slope or anything. Today's young people can't go five minutes without texting, surfing the Web or being on Facebook. (Heck, who am I kidding: A lot of adults can't go five minutes!) Giving these folks Google Goggles would be like those lab experiments in which rats push a button every time they want cocaine. What happens? Bing! Bing! Bing! Bye-bye happy rats!

I mean, didn't anyone at Google see "Brainstorm"? (R.I.P., Natalie Wood.)

However, it's not as if Google isn't taking precautions:

"Internally, the Google X team has been actively discussing the privacy implications of the glasses and the company wants to ensure that people know if they are being recorded by someone wearing a pair of glasses with a built-in camera," the New York Times said.

Which -- I don't know about you -- really puts my mind at ease. That should be an easy problem to solve. After all, Google is famous for worrying about privacy. (However, if Facebook is working on Friend Finder Frames, that's another story.)

OK, enough with the hyperbole. Here's what you really want to know:

According to the New York Times, Google wants the glasses on sale by the end of the year at a price ranging from $250 to $600 -- about the same as a smartphone.

Which is great -- because I thought they would be expensive or something.

Still, I'll bet Apple is toiling away right now on Apple Eyes (or would they be Apple i's?)

And why stop there? How about Nokia Noses, or Samsung Snouts, to help us smell better? And Ericsson Ears?

After all, my nose, and my ears, are pretty "dumb" too.

Bing! Bing! Bing!


Google's embarrassing Safari exploit

'Creatocracy' and the Internet free-for-all

The Dow is climbing! The Dow is climbing!

 -- Paul Whitefield

Image: Illustration from a YouTube video of how Google's Google Goggles technology uses photos to conduct Web searches. Credit: Google Inc.

Google's embarrassing Safari exploit

Google plus
The Wall Street Journal led its paper Friday with a story on what appeared to be an egregious privacy violation by Google: The advertisements from its DoubleClick subsidiary found a way to track users of Apple's Safari browser even if it was set to block tracking. The article produced the requisite call for a federal investigation and plenty of bad publicity for the erstwhile "Don't be evil" corporation. But Google's actions, although (ahem) aggressive, raise a different question from the one most observers seem to be asking. To wit: What should companies do when a user's privacy settings in one arena clash with those in another?

The problem started with Google trying to compete with Facebook's "Like" button, which can be incorporated into display ads to add some viral juice. Google wanted to let DoubleClick, its display-ad subsidiary, put a "+1" button in its customers' pitches. The button would let anyone who saw the ad tell the people in their Google+ circles (Google's equivalent of Facebook friends) that they liked it.

To keep the data about its users separate from that collected by advertisers, Google uses a separate, "third party" cookie to tell its servers whether the visitor to a site is logged into Google, in which case it adds a +1 button to the DoubleClick ad. But Safari is set by default to block third-party cookies, which often are used to track users for targeted advertising. That's what led Google to circumvent Apple's block in order to place a temporary third-party cookie and enable the +1 button. Google says it didn't realize that doing so would, under the rules set by Apple, open the door to DoubleClick sending more cookies, in particular the non-temporary kind that are used for ad targeting.

Even if the consequences were unintentional, it's not the least bit uncommon for bad things to happen when companies develop seemingly clever workarounds to the barriers placed in other companies' software. So I don't have a whale of a lot of sympathy for Google on this one.

Nevertheless, it's worth wondering why Apple's privacy settings should trump the preferences people set in Google. The latter's software tries to place a +1 button on ads because people who sign up for Google+ elect to be shown personalized content and ads. That's the default setting, but Google argues that people are given plenty of notice should they want to change it.

So, if you elect to be shown "personalized" ads -- i.e., targeted ones -- but you use the Safari browser, are you saying that you don't want to be shown personalized ads after all? Or were you simply unaware that Safari's default settings blocked the cookies needed to do the personalization?

Google, not too surprisingly, assumed the latter was true. In doing so, though, it overrode the preferences of people who used Safari precisely because they didn't want to be tracked by third-party cookies of any kind. Granted, some of the tracking that resulted might have been by happenstance. Rachel Whetstone, a senior vice president at Google, said the company hadn't intended to unleash full-blown tracking and targeting by DoubleClick, just the sort of personalization enabled by the +1 button. But that's what was happening, at least until the Journal called Google with its findings and Google stopped the +1 workaround.

As part of its settlement with the Federal Trade Commission over Google Buzz, Google agreed to make privacy a design principle in its new products. If that's the test, Google should start assuming that when preference settings clash, the most restrictive one should be respected unless users explicitly say otherwise. In other words, they have to use a different set of assumptions than they did when they tried to sneak their +1 button past Safari's cookie barriers.


Santorum: The personal isn't always political

Kinsley: For president, no experience needed

New report finds near universal irregularities in foreclosure sales

-- Jon Healey

Super Bowl: The right way to combat big-game pirates

Super Bowl on the PC
The Department of Homeland Security's Immigration and Customs Enforcement division continued its crackdown this week on copyright and trademark violators online, seizing 16 sites that allegedly streamed NFL games and other sports illegally and 291 that allegedly sold counterfeit sports memorabilia. ICE made the announcement in Indianapolis, the site of Sunday's Super Bowl -- a treasure trove of copyrighted video and trademarked brands.

The NFL welcomed ICE's crackdown, but let's be honest -- taking down 16 streaming sites won't stop the big game from being pirated. To its credit, the league took a far more important step on that front late last year: it agreed to let NBC, the broadcaster with the rights to Sunday's game, transmit it online as well. It's the first time the Super Bowl will be available legally online, after more than a decade of it being available illegally.

As college students would tell you, the best way to combat pirated video online is to make the programming available legally on attractive terms. Hulu, for instance, has made it unnecessary to download bootlegged TV shows through BitTorrent.

The Super Bowl is practically a throwback to an earlier age of television, before cable and DVRs splintered the audience and time-shifted the programs. Millions of people around the country -- around the world, even -- watch it at the same time. It's also ideal for a big screen, given how the action stretches across the field (during the fraction of time that the players are actually playing).

That's why it's the ideal program to transmit not just over the air and via cable but also through the Internet. League executives worried about undercutting the advertising revenue that justifies the high fees they command for the broadcast rights can rest assured that anybody who can watch the game on TV will do so. The online audience represents incremental revenue because it's made up predominantly of people who don't have access to a TV.

CBS knows this from its experience broadcasting the NCAA basketball tournament. For several years, the network has made every game available online, and it's turned March Madness on the Internet into a profit center without hurting its TV ratings. That's why CBS urged the NFL almost three years ago to put the big game online, to no immediate avail.

Webcasting the game won't make it any easier for pirates to make and distribute illegal recordings; they can do that already from the telecast of the game. What it will do is provide an attractive alternative to the innumerable unauthorized streaming sites, such as the one New England Patriots quarterback Tom Brady used to watch last year's Super Bowl while recuperating in Costa Rica.


Obama's tax code gambit

America's waning influence

The delayed gratification of the Facebook IPO

-- Jon Healey

Credit: NBC / Associated Press

The delayed gratification of the Facebook IPO

Mark Zuckerberg with the Facebook logo
Now that Facebook has filed the paperwork for its initial public stock offering, it's worth wondering why the company bothered. Its preliminary goal is to raise $5 billion, but its registration statement showed that it's already sitting on nearly $4 billion in cash. Meanwhile, its revenue was $3.7 billion in 2011 -- almost twice what it generated in 2010. It's net income: a cool $1 billion.

Clearly, this is not a cash-starved company.

Typically, companies go public to finance growth. And that's usually what happens; a survey of chief executives found that they created more than 90% their company's jobs after going public. But Facebook has been growing like kudzu as a closely held company, and it's had no trouble raising money through private offerings.

Instead, the real motive for the Facebook IPO seems to be enabling those early investors to cash out. Granted, they already have the ability to sell shares in the private markets that enable people to trade pre-IPO holdings. But public stock markets promise bigger gains -- in part because buyers there don't know as much about the company and aren't as realistic about its prospects. In other words, the chances are greater that buyers will pay more than the shares are worth in the long run.

There's nothing unfair about that. Nevertheless, policymakers should be troubled that Facebook and other hot tech companies are waiting so long to go public, severely limiting the number of people who benefit from their firms' explosive growth. Instead of a system that creates a handful of billionaires, wouldn't it be better to spread the risk and the potential gains among thousands, even millions, of investors?

That's not a call to redistribute Facebook's wealth. It's a call to consider the incentives that led the wealth to be so concentrated. The biggest may be the accounting, reporting and liability burdens that federal law places on public companies -- requirements that may be appropriate for well-capitalized behemoths but not for start-ups still waiting for their growth spurt.

The most burdensome of those mandates stem from Sarbanes-Oxley, the law Congress passed in 2002 in the wake of a series of high-profile securities frauds. SarbOx dramatically increased the cost of being a publicly traded company, and its enactment corresponds to a sharp reduction in the number of companies that go public. According to the accounting firm J.H. Cohn, IPOs fell by more than 75% from the 1990s to the 2000s.

President Obama has proposed giving smaller companies up to five years after their IPO before having to comply with one of the costliest provisions of SarbOx, the mandate to have annual audits of their internal accounting controls. Although the change would give investors less protection against securities fraud, it has bipartisan support. It also would enable companies to go public far earlier in their development, long before they're generating the kind of cash Facebook is. Facebook can afford to comply with the full scope of SarbOx today; five years ago, not so much.

Of course, Facebook may not have gone public any sooner even if there had been no SarbOx. By staying private, founder Mark Zuckerberg has been able to maintain tight control over his company. Then again, he'll continue to wield considerable power post-IPO because he'll hold most of the company's voting shares. According to a passage of the IPO documents unearthed by VentureBeat, Zuckerberg "has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets."


Turn that 'Like' icon upside-down

Newton:Who's in charge of the LAPD?

Legal hurdles to retrieving files from Megaupload

-- Jon Healey

Photo: Facebook CEO Mark Zuckerberg in 2007, a year after turning down a $1-billion takeover offer from Yahoo. He's still smiling. Credit: Paul Sakuma / Associated Press



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About the Bloggers
The Opinion L.A. blog is the work of Los Angeles Times Editorial Board membersNicholas Goldberg, Robert Greene, Carla Hall, Jon Healey, Sandra Hernandez, Karin Klein, Michael McGough, Jim Newton and Dan Turner. Columnists Patt Morrison and Doyle McManus also write for the blog, as do Letters editor Paul Thornton, copy chief Paul Whitefield and senior web producer Alexandra Le Tellier.

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