We've always had our concerns about the ridiculous DMCA "exemptions" process concerning circumvention of digital locks. If you don't know, the DMCA has a strict anti-circumvention rule that says breaking digital locks, such as DRM, is itself a violation of copyright law, even if the purpose of the lock-breaking does not infringe on anyone's copyright. As a sort of "pressure valve" every three years, people can "apply" to the Librarian of Congress for exemptions to that rule. This, of course, is completely ridiculous and backwards. We need to apply, once every three years, to use legally purchased products the way we want to without it being considered illegal? That's crazy. But it's the way things are set up, and it can lead to some bizarre scenarios. As we explained last year when the latest round of exemptions was announced, the Librarian of Congress took away the exemption for unlocking your phone... but provided a 90 day window.

That window ends on Sunday. In other words, unlocking your phone on Saturday: legal. Unlocking your phone on Sunday: you probably just broke the law. As the EFF properly notes, this is not what copyright law is supposed to be about:

"Arguably, locking phone users into one carrier is not at all what the DMCA was meant to do. It's up to the courts to decide."

I don't even think there's anything "arguable" about it. Copyright law has no business being involved in deciding whether or not my phone can be unlocked. It's silly that this is an issue. It's silly that there needed to be an exemption in the first place. And it's silly that this exemption is being taken away. It's for things like this that people lose respect for copyright law.

We've written a few times about Judge Paul Michel, the former Chief Judge for CAFC, the appeals court that handles all appeals in patent cases. He's an out and out maximalist, making claims that defy reality and suggesting a truly surprising ignorance of how innovation actually works today.

And yet, he refuses to give up his idealistic (and completely incorrect) notions of how patents work. The latest is a piece he's written for A Smarter Planet, a blog owned by IBM, in which he attempts to hit back at patent critics while arguing that what the US really needs is stronger patent protection, not weaker, including protection for things like software. The article is full of questionable assumptions combined with logical fallacies. I'm sure Judge Michel is intelligent and knowledgeable (you don't get as far as he did otherwise), but he does his own legacy a disservice by making arguments like the one he expresses here:

So in April, 1790, the first Congress enacted the first Patent Act. Over the next two centuries, the Act was amended and strengthened regularly, because successive Congresses observed industrialization and economic growth all around them, as under the Founders' system, the United States went from importing nearly all manufactured goods to itself manufacturing all the products it needed and prospering as a major net exporter.

Within just a little over one hundred years, America surpassed all other nations in wealth and technology, partly because of its strong patent system, aided by wide oceans, abundant natural resources, and universal public education. Throughout the 19th century American inventors outpaced their counterparts elsewhere. During the 20th century, the American patent system helped stimulate the computer revolution as well as astonishing advances in medicine, including creation of whole new fields, such as bio-technology. After a slump in the 1970s, when Japan replaced America as the leading maker of consumer electronics, in the last two decades of the century our nation regained its rapid growth and technological leadership.

This is a nice story -- and it's one that we've heard before. Unfortunately, it's not supported by the actual history. That history shows that the continued patent expansionism post-dated, not pre-dated significant expansions in innovation. That is, rather than encourage innovation, the increases in patenting almost always came after the innovation, when the early innovators then ran to the government to seek to block out follow-on innovations and competition from disruptive new upstarts. Furthermore, study after study has shown absolutely no evidence that strengthening a patent system leads to greater investment in innovation. Instead, it shows greater investment into patenting.

Ironically, criticism of patents and especially of the U. S. Patent and Trademark Office is peaking just as an array of reforms are taking hold. Over the past nearly four years the extraordinary leadership of former IBM executive David Kappos has greatly upgraded PTO operations. The courts, too, have instituted reforms in damages and other areas of controversy. Congress has responded by enacting the America Invents Act, which after a decade of neglect and fee diversion finally has provided the PTO with the resources it needs. The AIA also launched a Patent Pilot Program to have volunteer judges in over a dozen districts largely specialize in managing such cases. And, the private sector has stepped in to help train patent examiners in the newest technologies. In light of all this, now is the time to rely more, not less, on the American Patent System.

I'm not sure what's "ironic" here. The "reforms" that Michel mentions had nothing to do with the key complaints many made against patents: that they were being utilized by trolls to stifle real innovation, that patents themselves were overly broad and vague, that the damages awarded in patent infringement cases were excessive and had no basis in reality. Earlier versions of the AIA attempted to address some or all of those problems, but they were all left on the cutting room floor after patent supporters whined about them.

As for the "patent pilot program," it's difficult to see how that solves anything. In fact, it could actually make the problem worse, not better. As we've discussed, CAFC itself, which Michel used to lead, was the result of a similar "experiment," in which it was believed that centralizing all patent appeals cases to a single court, where a few judges would be "experts" would lead to better outcomes. But it did the opposite. That's because the judges had little contact with actual innovators, but plenty of contact with patent lawyers, who benefited from massive expansion of patent laws. And so they heard one side of the story over and over again, leading to massive expansion. Doing the same thing at the lower courts, and giving more power to a few judges who will be continually exposed to patent lawyers, is likely to create the same push towards expansionism in the district courts as well.

Nevertheless, some commentators suggest excluding whole business sectors, such as software, from patent eligibility and greatly shortening the patent term for other technologies. A few go so far as to say that only pharmaceutical firms really need patent protection. But the behavior of hundreds of companies in dozens of technologies suggests otherwise. Witness IBM: for the past 20 consecutive years it has received more U.S. patents than any other company in the world. Examples of other companies that rely on patents include Microsoft, General Electric, General Motors, Caterpillar, DuPont and Procter & Gamble. Ignoring such facts, certain commentators even argue that patents deter more innovation than they promote.

This assumes, entirely without proof, that companies that get patents do so because they promote innovation. This is laughable and simply untrue. Once again, studies have shown that patents and innovation are not linked but are entirely independent. Companies, however, see plenty of benefit in using patents in a protectionist manner to stamp out competition. Furthermore, the system is rigged these days such that companies that want to compete need a large patent portfolio not because it helps with innovation, but because it helps ward off some lawsuits from others to avoid a patent nuclear war with both sides suing each other.

Michel lovingly points to IBM's continual dominance in the patent numbers, but ignores the many stories of IBM's famed patent bullying, such as the bullying it did against Sun many years ago:

"OK, maybe you don't infringe these seven patents. But we have 10,000 U.S. patents. Do you really want us to go back to Armonk [IBM headquarters in New York] and find seven patents you do infringe? Or do you want to make this easy and just pay us $20 million?"

To argue that because large companies get patents, the patent system is working is just silly and unsupportable. Those companies don't "rely" on patents. They get them, because that's how the system works.

Yet, with many corporations and banks flush with cash reserves and pension and private equity funds seeking places to invest, now should be the era of increased investment in innovation, the country’s best hope for creating new wealth and new jobs. Instead, such investments lag. What, then, is needed to produce the needed private investment? Adequate incentives, for such investments are inherently risky. Slack consumer demand in a continuing recession is part of the problem, but so is the inadequate strength of patents. Obtaining and enforcing them remains far too slow, costly and cumbersome. Still worse, the uncertain scope of patents and the unpredictability of infringement and remedies outcomes inhibit business leaders who need certainty and predictability.

And this is the really nefarious part in Michel's argument. This isn't just an argument in favor of the patent system, it's an argument in favor of trolling operations. Trolls repeatedly try to defend their indefensible efforts by arguing that they're "investing" in innovation by paying for such "risk." Anyone who's experienced any run-in with patent trolls knows this argument is complete hogwash. Trolls do it because it's a system that allows them to legally shakedown real innovators for money, because it gives them a giant weapon where the cost to pay off the troll is almost always less than the cost to defend (and win) a case in court.

Most informed persons believe, correctly, that innovation holds the key to future prosperity. What we need is a stronger, faster, fairer patent system with quality patents and predictable protections. The issue is whether companies can look beyond short-term earnings and stock prices to also focus on the company’s long-term health and on the needs of the American economy, American communities and American workers.

Yes, we agree that innovation holds the key to future prosperity. The problem is that there is no evidence that the patent system actually increases that innovation, and a ridiculous amount of evidence that it does exactly the opposite. It retards innovation, diverting money from actual innovations that hit the market, to lawyers. The costs associated with the patent system far outweigh any benefits. Could you craft a functioning patent system? Perhaps, but today's system is not it, and if Judge Michel ever spent time with actual innovators who were the victims of patent trolling, he might learn something. But, you know, that would offend his patent lawyer and patent troll buddies.

This morning at CES, Senator Ron Wyden laid out a broad and detailed agenda for how Congress can and should promote internet freedom and increase innovation -- mainly by focusing on knocking down the barriers presented by legacy players who don't want to adapt or compete. Among other things, he talked about increasing access, pushing back on data caps, dealing with the harm of software patents, greater privacy protections and more. Joe Mullin at Ars Technica has done a nice job bullet-pointing the key planks if you don't feel like reading the whole speech linked above. I'm sure many here will appreciate this line from his speech:

What chills the sharing of ideas and collaboration is the maximalist approach to copyrights and patents. Rights-holders are too eager to use their power to scare off challenges to the status quo, and this perpetuates stagnation.

Other items of interest: he's working with Senator Al Franken on taking an antitrust approach to deal with net neutrality. Details obviously matter -- and I've been quite skeptical of net neutrality laws, as they seem ripe for regulatory capture by big broadband providers -- but an antitrust approach is at least an interesting idea. We've been arguing for nearly a decade that the whole concept of "net neutrality" is something of a red herring. The only reason net neutrality is an issue is because of a lack of competition. Thus, taking an antitrust approach may actually make sense, though (again) the details matter quite a bit.

On patents, he's arguing that we need much more detailed info on the impact of software patents on the economy:

A related concern is the affect of software patents on America’s ability to innovate. Congress should begin a review – a cost-benefit analysis – of software patents’ contribution to the economy. The acquisition of these patents appears less about deploying innovation and more about employing a legal arsenal. The patent system should not, as Julie Samuels at EFF says, operate as a tax on innovation, as it does now. How are you promoting innovation if you stand behind a law that enables a few lines of code to be patentable for 20 years? Software is different than a new invention. It is a building block -- a new set of instructions -- that should be continually built upon and improved.

This is good... but I still get nervous when people focus too much on software patents. There are significant problems with all kinds of patents, and focusing just on "software" alone, may leave other problems in place. Still, more data and information is a good thing, and a serious look at the economic impact of software patents can only be a good thing.

In separate conversations after his speech, Wyden made it clear that with all the other -- more high profile -- things that Congress is fighting over in the next few months, it may be difficult to get too much through Congress, but he is quite reasonably optimistic about how many people in Congress are awakening to the importance of the internet and to understanding the wider concerns of all of us who use the internet on a daily basis.

Well, this is amusing. San Francisco wireless ISP MonkeyBrains (who some friends use and love) has posted an IndieGogo crowdfunding project in which they're seeking $325,000,000 (yes, that's $325 million) to build a satellite to deliver internet access. The "tiers" are interesting. The lowest is $5,000 (two people have claimed those already!) but then quickly escalate to $10 million for the second tier. Of course, if you pay that, you get a gigabit internet connection for 5 years (only 5? guys, c'mon!). The full description of the project is worth reading:

Abstract

MonkeyBrains is a local ISP in San Francsico.  North Korea just launched a satellite; we want to as well.

The Cost Breakdown of Launching a Satellite

A quick internet search reveals that this is the cost for getting a satellite into orbit:

• Satellite manufacture: $150M
• Satellite launch: $120M
• Launch insurance: $20M
• In-orbit insurance: $20M
• Satellite operations (15 years): $15M

Faster Internet!

Our initial research seems to indicate having a satellite in orbit may not speed up your internet at all. [http://en.wikipedia.org/wiki/Satellite_Internet_access#Geostationary_unsuitable_for_low-latency_applications].  However, if more research doesn't bode well for a geostationary satellite, we will take all of the $325M to fund either:

• Fiber to the home.
• A balloon tethered to the Farallon islands.
• a hovering drone over the Bay.

Trust Us

Some people just can't beleive we want to make the Internet Faster and Cheaper (and more Out of Control) than it already is.  Your money will be spent well, and San Francisco (and possibly -- if funds allow) the entire Bay Area will benefit.  We have set this fundraiser as Fixed Funding, so there is no risk of sending MonkeyBrains a little bit of money from your wallet without many other people feeling the same way.

Obviously, this is a joke by MonkeyBrains, but it's still interesting to see. It appears that they're trying to use this as a bit of a marketing effort -- not all that different from some of the products we've offered for sale in our store. The reason people like crowdfunding goes beyond just the money-raising part to the fact that it can also be an effective marketing platform. Here, it looks like MonkeyBrains is testing out the marketing aspect with little likelihood of actually using the fundraising part.

Oh, and don't miss the video, in which they explain their plan to use UFOs to deliver little pieces of internet from the satellite to your computer.

Update: And... after a bunch of negative publicity, Apple has reversed course and lifted the ban. Original article below...

A bunch of folks have been submitting this story about Apple refusing to allow a company, Edison Junior, to offer its Lightning connector as part of its POP portable power station, which had run a very successful Kickstarter campaign earlier this year. Edison Junior is returning everyone's money -- even covering credit card fees and Kickstarter's fees (though it's asking Kickstarter to give that back as well), but is reasonably angry. According to VentureBeat:

“We are pissed,” Edison Junior CEO Jamie Siminoff told me on the phone today. “I think they are being a bunch of assholes, and I think they’re hurting their customers.”

Understandable. The company plans to still build versions of the device that focus on the Android market, and which might possibly work with Apple products if people use adapters, but it's certainly not ideal.

The whole thing, of course, is silly, but representative of the unfortunate world we live in today where companies lock up their products. In the past, building alternate versions or compatible accessories, and reverse engineering parts, was generally considered part of how an ecosystem was built up around your market. But Apple's infatuation with over-controlling its market only serves to piss off Apple customers who want a solution like this. Unfortunately, due to the nature of using security chips and claiming patents on everything, rather than just being a simple reverse engineering challenge, Apple is effectively able to use patent and copyright laws to block any such innovation.

One of the areas of economics I'm most interested in is focused on incentives. While it's a simplification of things, there are so many areas where people seem to naturally gravitate towards negative reinforcement as an incentive system -- that is, punishing people for things they believe are wrong. While that does work in some cases, it's amazing just how frequently positive reinforcement to nudge behavior in a better direction works much, much, much more effectively. Aaron DeOliveira points us to an interesting example of a company focusing on positive reinforcement in an area where most people have long-assumed that punishment was the only possible option: dealing with the annoyance of people texting during a movie. The first response that many theaters (and theater goers!) have, is to "punish" this behavior by outlawing it. They set up rules and put up signs. They have silly commercials before the show about how annoying it is. But it's all based on the idea of negative reinforcement: punishing or shaming those who engage in the behavior. But, quite frequently, that does little to actually get people to stop.

So, it appears that the Cinemark chain of theaters is trying a system of positive reinforcement. Within its normal movie app for iOS and Android is a separate "mini-app" allowing users to put their phones into "CineMode." It automatically makes the screens on the phones dim, and puts them into vibrate mode -- sort of like an equivalent to airplane mode. But here's the kicker: since the app knows what you're doing, it can keep track of whether or not you actually follow through and leave CineMode enabled throughout the entire flick. For the users who do that, they get rewarded:

When the movie ends and the guest exits CineMode, Cinemark will automatically send a reward (digital coupon) through the app and store it in the Rewards section.

Who knows how well it will work in practice, but it's great to see people realizing that technology can help enable this kind of positive reinforcement, rather than always doubling down on the negative reinforcement/punishment.

Back in 2010, we wrote about a report suggesting that Intellectual Ventures was using somewhere around 1000 shell companies to hide many of its patent shakedown attempts. For years, IV itself liked to say that it wasn't involved in any patent litigation directly (that changed not so long ago), but we had seen some IV patents showing up from some small patent trolls, where it was impossible to determine who actually controlled the patent or the lawsuits. However, at times, other companies have argued that the shell lawsuits were really IV in disguise.

A few months ago, we wrote about an attempt to crowdfund an investigation into all of IV's shell companies. While that attempt to raise money did not reach its goal, it has helped put renewed attention on IV's use of a massive number of shell companies. In response, IV has been trying very hard to play down the whole thing. It published a ridiculous blog post arguing that the use of thousands of shell companies is just a normal business procedure:

This is a common practice for asset management firms, and it’s just common sense. Do stock brokers broadcast tips to their competitors? Does Warren Buffet tell the world where he’s investing next? Does Disney broadcast which plots of land it is planning to buy for its next theme park? Of course not, and IV takes a similar approach to our investments.

Ah, sure, this is all to throw other companies off the scent of what IV is "investing" in. That makes sense if IV were actually an investment company, rather than a shakedown play. The idea that publicly stating what patents it owns would somehow "broadcast tips" to "competitors" is ridiculous. Who out there is really an IV competitor? No, what IV is almost certainly worried about is that, if the extent of its activities were known, there would be more fodder for real and necessary reform against trolling -- and, more importantly, it's worried about tipping off the companies it's about to go after. It's not about competition -- it's about avoiding a smart company going to court to get a declaratory judgment against IV, which they admit later on in the post:

Moreover, were we to publish the entirety of our holdings we, or any other company for that matter, could find ourselves mired down in a series of tactical declaratory judgments and reexaminations.

Shocking. Perhaps if you didn't go around demanding huge sums of money from companies with a giant stack of vague and overly-broad patents you wouldn't face a series of declaratory judgments and re-exams.

In fact, no one has ever suggested that transparency is needed in the real estate world, yet properties are routinely held in the name of holding companies. When it comes to property ownership, patents shouldn’t be held to a different of set of rules

Well, if property holding companies routinely used their assets to shake down every other real estate owner out there, perhaps there would be calls for the practice to end. Plus, sorry, patents are not "property" like real estate is property. And, in fact, this is the key to IV's entire business model. If patents properly delineated the boundaries of what the patents covered, there wouldn't be much room for trolling. But, instead, IV relies on the fact that patents are broad and vague and "might" apply to all sorts of things.

In response to an article about all of this, IV also claimed that anyone who wanted to know about what patents IV holds can simply "search the USPTO's public database." Of course, this is a snarky and misleading answer for a number of reasons. First, it ignores the shell company patents. Second, it assumes that the USPTO's search actually works well (it does not).

Thankfully, however, the good folks at PlainSite, who try to shine some light on the hidden corners of the legal system, decided to take Intellectual Ventures up on its offer -- and actually went through the data to see what was lurking:

Like all of the USPTO's on-line systems, the assignment database is a technological abomination--sadly ironic for the agency that effectively manages the nation's technology rights. (The USPTO does deserve credit for making raw XML data available through Google, which is where our project began.) It must be noted that Intellectual Ventures would have had a much harder time lurking in the shadows all these years if government information technology systems, such as the USPTO assignment database and different states' corporation databases, were kept up to par. In fact, its business model would likely be impossible, as the courts would be likely to label the company as a vexatious litigant if they only knew how many lawsuits it filed.

In the end, after digging through the database, PlainSite has identified -- and released for all your enjoyment -- the names of what appear to be over 2,000 shell companies, though they admit that some of them may be fully independent. But... many of them apparently had "some obvious overlaps" like sharing "managing corporations, telephone numbers, and other factors." Oops. They're hoping not to "crowdfund" the efforts here, but rather to crowdsource the data. As they note, they're spreading this information, because "we hope that Congress and the courts take notice of one of the largest racketeering schemes ever perpetrated on the nation, with some of its richest billionaires acting more like thugs than visionaires."

What's really amazing in all of this is the way that IV execs keep spewing highly questionable arguments for why they're not so evil, when all the data just keeps pointing in the other direction. You could almost respect the folks there if they just came out and admitted that they'd realized that there was a system that could be gamed, and they've gamed it to the tune of billions of dollars. But, instead, they keep trying to justify the company's entire model by completely denying reality.

We've talked in the past about patent system supporters' somewhat blatant cluelessness to China's clear recognition that its own growing patent system is the perfect tool for backdooring protectionism and trade barriers, without making it look like protectionism and trade barriers. I sometimes can't tell if this is just because those system supporters are so focused on the narrow "more patents must be good" argument that they're missing the big picture, or if they truly don't understand what's happening. Either way, we've got the latest example, as the folks at the World Intellectual Property Organization (WIPO), a part of the UN, are celebrating the fact that China's patent system has received more applications than any other patent system this year.

China received 526,412 applications compared to 503,582 for the United States and 342,610 for Japan, according to the latest report from the Geneva-based World Intellectual Property Organization (WIPO).

Now, some might wonder why this is happening -- or even look to some of those earlier examples where China has used the patent system specifically to hold back foreign competition and wonder if this is actually something worth celebrating.

But not WIPO.

It thinks that patents are good, so more patents must be excellent:

“Sustained growth in IP filings indicates that companies continue to innovate despite weak economic conditions,” said WIPO’s Director General, Francis Gurry. “This is good news, as it lays the foundation for the world economy to generate growth and prosperity in the future.”

Except almost nothing that Gurry says there is even close to accurate. It assumes -- without proof -- that increased patent filings have something to do with innovation. They don't. Increased patent filings only show people are filing for more patents. That is not the same thing as suggesting that they are innovating, because research has shown that patent numbers do not correlate well with innovation. Furthermore, a massive growth in patent applications does not "lay the foundation for the world economy to generate growth and prosperity." Again, the reality is almost entirely opposite. It lays the foundation for a massive hindrance on innovation, increasing the amount of patent trolling, protectionism and general holding back of true innovation. And this doesn't even touch on the fact that China's numbers are propped up by the crazy incentives it's been giving to people to file for patents.

This is a massive problem with groups like WIPO. They never seem to recognize that "more patents" or "more copyright" aren't automatic good things. They simply assume -- despite a total lack of evidence -- that it must be so. Considering the harm that over-protection can do to any market, it's a really ridiculous stance to take, and it makes WIPO and the UN lose nearly all credibility on the subject of patents and innovation.

We kind of knew this was going to happen all along. But as the FCC is figuring out how to distribute a bunch of useful spectrum, some in Congress are taking the short-sighted, anti-innovation approach of demanding that it be auctioned off for closed uses, rather than made unlicensed for wider benefit. This is a debate that should have ended ages ago. Open spectrum drives innovation -- unquestionably. Just look at the rise of WiFi and Bluetooth and what that's enabled over the past decade plus. The impact of those two technologies has greatly outweighed any benefit from licensed, locked up spectrum. But, of course, the telcos want that spectrum locked up and limited for use just by their own services (even as they increasingly piggyback on unlicensed spectrum to save money). And, in true corruption laundering fashion, they're able to put forth a "plausible" explanation for why the FCC should auction it off rather than open it up: money. That is, if the FCC auctions if off to telcos for closed use, the federal government can likely raise somewhere in the range of $19 billion (some reports suggest much higher: the CBO predicts nearly $25 billion, and others have suggested it could go even higher than that). That's a decent chunk of cash, obviously. So, Congress is now whining about how the FCC's plan to support unlicensed spectrum is some sort of ridiculous give away by the federal government:

Representative Greg Walden, an Oregon Republican, who is chairman of the panel, said the law that gave the F.C.C. the ability to conduct “incentive auctions” of newly available spectrum required “maximizing the proceeds from the auction.”

For the F.C.C. to obtain the highest price for the spectrum it sells, it should limit the size of guard bands, Mr. Walden said; he said the six-megahertz minimum size proposed by the F.C.C. was unnecessarily fat.

You see, apparently these members of Congress don't want the FCC to do what's best for the country or for innovation. It doesn't want the FCC to do what's best for long term growth (which, in turn will increase tax revenues over the long term). No, these members of Congress instead are only focused on the big upfront number of getting cash now from telcos, even if it means less innovation, less useful tools for the public and less tax revenues down the road. I guess it shouldn't be any surprise that telco companies are among the top five contributors to Walden's most recent campaign (coming right after... lobbyists). Whatever happened to that idea that elected officials should have to wear patches, a la Nascar, of who funds their campaigns?

We've argued, for a long time, that just railing against "middlemen" misses the point. There are always middlemen. But not all middlemen are created equal. The distinction, that we've discussed multiple times, is the difference between enablers and gatekeepers. That is, historically, many middlemen came to power because they were gatekeepers. If you wanted to do something -- be a musician, write a book, sell a new product -- you effectively had to get "approval" and support from a gatekeeper who had access to those markets. Being a gatekeeper gave them enormous power, such that the gatekeepers often became central to the market, rather than the people/companies they were working with and it also allowed them to craft ridiculous deals that were incredibly favorable to themselves, at the expense of those they were working with. That, of course, is why there tends to be so much inherent antipathy towards traditional gatekeepers.

In contrast to that -- and what we found most exciting about many of the new companies that had popped up over the last decade or two -- was the rise of middlemen as "enablers." These were situations where the middlemen weren't gatekeepers, and weren't "required" to do what you wanted to do. Instead, they were companies that helped give people/organizations a lift up on what they were trying to do, while keeping them and their work (rather than the middlemen) central to the market. So, when you see things like eBay or Etsy or Kickstarter, those are more enablers (and, yes, they do have some restrictions on use, but they're more policy based, rather than "can you make us money"-based).

Of course, the truth is that there's a spectrum along which these middlemen lie. It's not two separate buckets, where "enablers" are here and "gatekeepers" are there. Rather, intermediary companies often fall somewhere along that spectrum. It seems somewhat clear that, for the most part, newer firms are becoming successful by being enablers, rather than gatekeepers. But... they don't necessarily remain enablers their whole lives. One thing that is worth paying close attention to, is how companies shift over time, and when they start to shift from being enablers to being gatekeepers.

In fact, it seems like some of the big "clashes" we've been seeing in the tech/web world lately are along those lines. Lots of people have talked about Instagram and Twitter fighting with each other, which is just the latest in a series of "fights" among hot web companies blocking each other. Considering that many of these companies grew up on a web 2.0 ethos of openness and sharing -- and we're now watching them get more locked down, proprietary and limiting -- it seems obvious that some of these companies are moving along the spectrum from enabler to gatekeeper.

Anil Dash recently wrote a great post in which he frets about the fact that we're effectively losing key parts of the open web, which made the web great. You should read the whole post, as I couldn't do it justice summarizing it here. Again, it seems like many of his points are really about some of the more successful "internet" companies moving along that spectrum more towards the gatekeeper side of things, and that clashing with the more open spirit that the enablers built their reputations on. Dash, rightly, points out that this is self-correcting over time. We shouldn't necessarily fear the new gatekeepers, mainly because a gatekeeper business model, while lucrative in the short-term, is unsustainable in the long term. Companies, which move along that chain chasing the easy money, need to learn that they do so at their own peril. Becoming a gatekeeper merely opens up massive opportunity for a new enabler to disrupt you. That's a lesson that too many companies learn way too late.

That said, Dash fears that because a new generation is growing up in a world with more closed systems, that we may lose some generational knowledge of what came before:

This isn't some standard polemic about "those stupid walled-garden networks are bad!" I know that Facebook and Twitter and Pinterest and LinkedIn and the rest are great sites, and they give their users a lot of value. They're amazing achievements, from a pure software perspective. But they're based on a few assumptions that aren't necessarily correct. The primary fallacy that underpins many of their mistakes is that user flexibility and control necessarily lead to a user experience complexity that hurts growth. And the second, more grave fallacy, is the thinking that exerting extreme control over users is the best way to maximize the profitability and sustainability of their networks.

The first step to disabusing them of this notion is for the people creating the next generation of social applications to learn a little bit of history, to know your shit, whether that's about Twitter's business model or Google's social features or anything else. We have to know what's been tried and failed, what good ideas were simply ahead of their time, and what opportunities have been lost in the current generation of dominant social networks.

I both agree and disagree. I'm among those who get a bit frustrated when I see new entrepreneurs trying something that was done before -- and they seem to have no knowledge of it (ditto for reporters who cover the big "new thing" without mentioning that half a dozen companies did exactly the same thing a decade earlier). But, some of that, I'll admit, may just be the onset of old fogeyism. Yes, there's value in knowing the past, and learning from it, but there is also value in the naivete with which some new entrepreneurs jump into the pool -- often not fully understanding the past. Will they repeat some of the mistakes? Sure. Absolutely. But not being burdened with the past can sometimes be a key ingredient in redoing something that failed in the past, and in somehow making that slight unexpected tweak that just makes it work.

So, I agree wholeheartedly that the "new gatekeepers" mean that we've lost some sense of what made the last generation of internet companies great. And I do hope that the next generation that comes along can similarly disrupt the last generation, often by being the enablers that break up their new gatekeeper role. And I think that companies who understand the history of how enablers disrupt gatekeepers should understand why progressing down that spectrum in search of short-term profits can lead to long-term pain. So I think it's wise for those companies to learn from history. But I'm less worried about the new entrepreneurs jumping into the space. They'll likely find their opportunities in being the new enablers, because that's where the disruption occurs.

Watching the cycles of innovation can be a fascinating (and at times frustrating) past time. Companies make the same mistakes over and over again. The ones, which actually don't fall for the usual traps, are few and far between. But, in the long run, the new startups tend to be pretty good at showing the old guard that they chose the wrong path.