Techdirt. Stories filed under "capitalism" Easily digestible tech news... http://www.techdirt.com/ en-us Techdirt. Stories filed under "capitalism"http://www.techdirt.com/images/td-88x31.gifhttp://www.techdirt.com/ Fri, 22 Jun 2012 17:35:00 PDT Every Successful New Technology Has Created Panic From Those It Disrupts Mike Masnick http://www.techdirt.com/blog/innovation/articles/20120620/04143519399/every-successful-new-technology-has-created-panic-those-it-disrupts.shtml http://www.techdirt.com/blog/innovation/articles/20120620/04143519399/every-successful-new-technology-has-created-panic-those-it-disrupts.shtml capitalists who fear change -- discussing how companies and industries in an otherwise capitalist/free market society freak out when they face competition from disruptive innovation. They go to amazing lengths to claim that it's not real competition or innovation they face, but something that must be illegal, immoral, unethical or the death of all things good and holy. The technopanics set in with alarming frequency, and in the end, they are always wrong. The end result ends up being bigger and better than ever before, even if some of those legacy players don't make it through. Tucker tells the story wonderfully:
Through our long history of improvement, every upgrade and every shift from old to new inspired panic. The biggest panic typically comes from the producers themselves who resent the way the market process destabilizes their business model.

It was said that the radio would end live performance. No one would learn music anymore. Everything would be performed one time, and recorded for all time, and that would be the end.

Of course that didn’t happen. Then there was another panic when records came out, on the belief that this would destroy radio. Then tapes were next and everyone predicted doom for recorded music since music could be so easily duplicated (“Home Taping is Killing Music”). It was the same with digital music: surely this would be the death of all music!

And think back to the mass ownership of books in the 19th century. Many people predicted that these would destroy new authors because people would just buy books by old authors that were cheap and affordable. New authors would starve and no one would write anymore.

There is a pattern here. Every new technology that becomes profitable causes people to scream about the plight of existing producers. Then it turns out over time that the sector itself thrives as never before but in ways that no one really expected.
Tucker includes other examples, but then explains the reality of innovation and profits. Profits are a temporary thing: because copycats do come along. But that's a good thing, because it forces greater innovation, as others seek to collect profits. You profit by being unique and different, and you encourage that to continue by letting others copy. That leads to more incentives to keep innovating and keeping make the world a better place. But, of course, that's hard, and companies want to keep their profits. So they move away from free market capitalism, towards crony capitalism:
This is why business is always running to government for protection. Kill this crazy new technology! Stop these imports! Raise the costs on the competition! Give us a patent so that we can clobber the other guys! Impose antitrust law! Protect me with a copyright! Regulate the newcomers out of existence! Give us a bailout!
And, of course, the public often accepts the moral panic story. Hell, I'd bet that even the companies making those claims -- completely out of self-interest -- believe the horrible things they're predicting from these new technologies. Jack Valenti was being sincere when he thought the VCR would destroy Hollywood. He was wrong. They're always wrong.
Here is a striking fact about the human mind: we have great difficulty imagining solutions that have yet to present themselves. It doesn’t matter how often the market resolves seemingly intractable problems, we still can’t become accustomed to this reality. Our minds think in terms of existing conditions, and then we predict all kinds of doom. We too often fail to consistently expect the unexpected.

This poses a serious problem for the market economy, which is all about the ability of the system to inspire discovery of new ideas and new solutions to prevailing the problems. The problems posed by change are obvious enough; but the solutions are “crowd sourced” and emerge from places, people, and institutions that cannot be seen in advance.

Capitalism is not for wimps who don’t want to improve. If you want guaranteed profits for the few rather than prosperity and abundance for the many, socialism and fascism really are better systems.
The full piece is absolutely worth reading.

Permalink | Comments | Email This Story
]]> well-said http://www.techdirt.com/comment_rss.php?sid=20120620/04143519399 Fri, 3 Jun 2011 11:14:10 PDT Entertainment Industry Lawyer: The Public Domain Goes Against Free Market Capitalism Mike Masnick http://www.techdirt.com/articles/20110603/00214214533/entertainment-industry-lawyer-public-domain-goes-against-free-market-capitalism.shtml http://www.techdirt.com/articles/20110603/00214214533/entertainment-industry-lawyer-public-domain-goes-against-free-market-capitalism.shtml hearings on copyright for pre-1972 recordings, where we already noted with some amusement how the RIAA is suddenly afraid of federal copyright law, preferring the ridiculously more draconian state copyright laws that avoid both the public domain and termination rights. On top of that, we've pointed out that the RIAA's representative flat out claimed that there's no value in the public domain.

From Copycense's tweets, there was one other attendee who seemed to be even more extreme: Ivan Hoffman. Frankly, I'd never heard of the guy before, but you can visit his masterful website here, which looks like it was designed in the early 1990s and never updated. However, I must warn you that in the mind of Ivan Hoffman, you may be violating his copyrights just visiting the site. That's because, at the bottom of the website, it states:
© Copyright 1992-2011 by Ivan Hoffman. All Rights Reserved. No portion of this site, including this home page and any of the separate pages, may be copied, retransmitted, reposted, duplicated or otherwise used without the express written permission of the copyright proprietor. This site is the subject of registered copyrights.
A couple things on this. First, the statement borders on copyfraud (some might say it goes beyond the borders), in that copyright does not allow the rights he has claimed. You absolutely can copy portions of his website if you're using them (as I am here) in a manner consistent with fair use, or if the specific content copied is not actually subject to copyright (and one can make an argument as to whether or not the copyright statement above, itself, is actually subject to copyright). But, even more to the point, if you simply visit his website, you have "copied," "duplicated" and "otherwise used" his website without the express written permission. I'm sure someone could argue the retransmission and reposting too. After all, when you click on the link above (I hope that's not retransmitting or "otherwise using!") you are instructing your computer to make a local copy on your hard drive... all without his express written permission.

So, anyway, that gives you a sense of who we're dealing with here.

What did Hoffman have to say? Well, there were two separate points that seemed worth covering, which I've embedded below via Copycense's tweets, and assuming that Copycense's reporting is accurate (and I have no reason to believe otherwise), it makes you wonder why the Copyright Office would have someone like him speak at their hearings. Specifically, he appears to claim that there should be no public domain, that copyright should last forever, and the very idea of the public domain is anti-free market. The specific statements in Copycense's tweets:
Hoffman: We don't take houses or cars back, but we take back copyrights. Why?

Hoffman: All of this is contrary to free market capitalism
This is, of course, hogwash that anyone who actually understands either the history and intention of copyrights or basic economics would recognize makes no sense. On the reason for the public domain, there's a rather excellent book on the subject that Hoffman might want to read. But the shorthand reason should be clear to anyone who understands copyright: it was to "promote the progress of science," by which the purpose is to benefit the public by giving them access to more content. Arguing contrary to that is simply twisting copyright law away from its core purpose. Furthermore, the basic ingredients of culture and content are earlier works. If we locked up everything, we'd have a lot less content and culture, entirely contrary to the Constitutional reasons behind copyright law. That a copyright lawyer would argue otherwise, to the Copyright Office, no less, is stunning.

And don't get me started on the ridiculous suggestion that putting works into the public domain is "contrary to free market capitalism." Which sounds more like free market capitalism: a world in which there is no government monopolies and interference for people to create and build... or one in which there's a central authority granting monopolies and changing those terms at will?

I asked Copycense if he could clarify what Hoffman was saying, and if (maybe? please?) these statements were sarcastic. Copycense says he's positive they were not sarcastic, and thinks Hoffman just meant that changing the copyright terms on anyone violates the Constitution. In fact, in support of that position, Hoffman also provided this lovely nugget, apparently:
Hoffman: "I have a problem in abrogating contract rights that have been in place for 30, 40, 50 years"
He, of course, is talking about the idea of moving pre-1972 works away from their current status and over to existing federal copyright law. But... if he's so against abrogating contract rights, then, um, shouldn't he be hopping mad about all of the retroactive copyright extension out there? Shouldn't he note that the composition copyrights on all of those songs should be in the public domain? After all, the contract offered to the musicians, at the time those songs were written, was that they would be getting exclusivity on the work for 28 years, followed by another 28 years if they reregistered. In exchange for granting them this monopoly, the public would get the work at the end of that period of time. And yet... with the 1976 Copyright Act, the government totally "abrogated" the contractual rights of the public, and unilaterally extended the copyright. It's really quite incredible that one can claim, with a straight face, that lengthy copyright on old works through extension is fine, but a minor move to put certain works under copyright is somehow violating contract law.

So, it appears that he thinks copyright should last forever... and he's against changing the "contract" on copyright related terms... unless the change screws over the public and completely tramples the existing agreement they had.

Permalink | Comments | Email This Story
]]> say-what-now? http://www.techdirt.com/comment_rss.php?sid=20110603/00214214533 Wed, 31 Dec 2008 11:04:24 PST Free Market Capitalism, Moral Character And Doing Good All Work Hand In Hand Mike Masnick http://www.techdirt.com/articles/20081226/1746173222.shtml http://www.techdirt.com/articles/20081226/1746173222.shtml moral questions shouldn't even come up at all in scenarios where everyone is better off. Moral questions only arise in scenarios where some are worse off and some are better off, and a decision needs to be made about who is worse off and who is better off. The nice thing about free market capitalism is that it tends to increase the overall pie, allowing a much larger number of people to be better off, and tends to do so in a more efficient manner than other systems.

Yet, then we have odd stories about people complaining about for-profit charitable organizations even when those charitable organization end up raising significantly more money for charities than their non-profit "competitors." There's nothing inherently evil about profit -- and if you look at much of the important charitable giving out there today, it was created because of profit. The Bill and Melinda Gates Foundation -- which is based on this very idea of doing good through capitalism is built off of the vast profits earned by Gates and Warren Buffet. Google's charitable wing, Google.org, is also designed as a for-profit enterprise, recognizing that if it can make everyone better off while making itself better off, there's no moral dilemma at all.

But, still, there are some who suddenly question whether or not the free market takes away a moral backbone -- but the only situations in which that would clearly be true are in cases of either outright fraud, or where you're dealing with a zero-sum game. In an economy that has the potential for growth, then one should encourage more growth to increase opportunities for everyone. There may be additional moral questions later concerning overall allocation, but increasing the wider opportunity, which is exactly what free market capitalism does, seems ridiculous to question.

In the end, it seems that some have this odd guilt associated with money -- as if because one person has made a lot of it that it somehow takes away from others. That's simply not true. Adam Smith, who wrote the original book on free market capitalism, The Wealth of Nations, only did so after first writing a book on morality, called The Theory of Moral Sentiment. Free market economics and morality go hand in hand. To think that they're mutually exclusive shows both a misunderstanding of morality and economics.

Permalink | Comments | Email This Story
]]> can-we-get-over-this-already? http://www.techdirt.com/comment_rss.php?sid=20081226/1746173222 Wed, 26 Nov 2008 19:38:00 PST Free Is Not Socialism Mike Masnick http://www.techdirt.com/articles/20081121/0323212915.shtml http://www.techdirt.com/articles/20081121/0323212915.shtml decries "digital socialism" and the second part goes after the "tyranny of the consumer." This, by itself, seems contradictory. The capitalist free market works thanks to the tyranny of the consumer. That is, the entire reason why the free market works is because consumers have power to move to a competitor -- and that keeps producers in-line. Complaining about consumers getting their way is a rejection of capitalism and the free market, not support for it.

The complaint about "socialism" is even more confusing. The writer confuses the fact that anyone can own a copy of a non-rivalrous, non-excludable good with "collective ownership." That's quite wrong. Socialism is, indeed, about collective ownership of a single good -- with multiple folks sharing ownership of a single scarce good. What people are talking about when they discuss digital content going free is not collective ownership, but how supply is infinite such that everyone can own their own copy. It's the opposite of socialism or collective ownership. It's very much about allowing personal property to thrive. The article also makes the odd (and incorrect) claim that those supporting such freeing up of digital content are, like "socialists" asking for government interference in the market. Amusingly, just a few paragraphs after making this claim, the writer goes through the history of intellectual property in the US, detailing exactly how intellectual property is government interference in the market.

It never ceases to amaze me that people claim that the free market economics we describe is somehow "socialist," when the system they support is a system of government-granted monopolies managed through a centralized government body. How is that possibly more capitalist than actually letting the free market come up with reasonable business models that don't rely on governments defining the winning business model?

Permalink | Comments | Email This Story
]]> this-again http://www.techdirt.com/comment_rss.php?sid=20081121/0323212915 Fri, 5 Sep 2008 19:42:00 PDT Maximizing Profits Doesn't Mean Screwing Your Customers Mike Masnick http://www.techdirt.com/articles/20080904/0248552163.shtml http://www.techdirt.com/articles/20080904/0248552163.shtml debunking the ridiculous notion spread by some that Craigslist was somehow "anti-capitalist" or not "maximizing profits" because it actually offered most of its services for free. As we noted, much of Craigslist's long-term success was because of these decisions -- which in all likelihood did increase overall profits for the company in the long run by building up further trust in the company. It may not have maximized profits for this quarter, but it most likely was doing a pretty good job in generating profits for the long haul by keeping customers happy, rather than trying to squeeze them for every immediate dime (and who was just saying that Silicon Valley doesn't have a long term view?)

Now we've got another similar story, as the LA Times is positively amazed that the popular virtual world Habbo Hotel limits its users to spending no more than $35/month, on the theory that many of its users are teenagers, who could get sucked into spending on stuff, which could lead to eventual backlash. Its CEO made this clear in a recent interview, saying: "We didn't want a situation where teens were raiding their parents' credit cards to be able to play.... We really don't want teenagers to spend more than the price of two movie tickets a month on Habbo."

So, how does the LA Times describe this decision? It points out, partly in jest, that "turning down money seems un-American." Again, even if this wasn't meant as a serious comment, it's similar to the silly claims about Craigslist. Habbo Hotel has simply made a strategic long-term decision on ways to best maximize its success for the long haul. And, part of that probably included the calculation that Habbo would have been in quite some trouble if news stories started showing up about kids bankrupting themselves buying virtual trinkets for their Habbo Hotel world. Limiting how much people can spend isn't anti-American or anti-capitalist or even anti-profit maximization. It's just taking a much longer term view of the best way to maximize profits over the long run.

Permalink | Comments | Email This Story
]]> rinse,-lather,-repeat http://www.techdirt.com/comment_rss.php?sid=20080904/0248552163 Fri, 1 Aug 2008 09:35:08 PDT Keeping The Benevolent Dictators Of Silicon Valley Honest Mike Masnick http://www.techdirt.com/articles/20080731/0216021848.shtml http://www.techdirt.com/articles/20080731/0216021848.shtml discussing her worries about "Silicon Valley's benevolent dictators." It's an interesting read that brings up some excellent points. It starts off pointing out the rather insular view many folks have in Silicon Valley about "the rest of the world" and the sort of hubris that comes out of the Valley on a regular basis. That, of course, is nothing new, and is a criticism that has been leveled at Valley inhabitants for many, many years. And, indeed, there is a "clubby" nature to Silicon Valley at times, that has both good and bad sides to it.

MacKinnon points out, correctly, that Silicon Valley-ites also tend to put blind faith into the idea that technology = freedom, and freedom = good, in a rather libertarian sense. Again, that's been said before. But then she points out something of a contradiction in all of this libertarianism, by noting that in fighting against any government regulation while putting all our faith in technology, we actually end up with a system of "benevolent dictators" made up of the folks who control the technology we put our faith in. That is, she worries that in rejecting government regulation, we've approved a defacto dictatorship in the form of the companies we put our trust in. In some sense, this is channelling Jonathan Zittrain's pessimism about what happens when those benevolent dictators turn away from benevolence.

Basically, what both MacKinnon and Zittrain are pointing out is that technology is just a tool. It can be used for good or for bad purposes, and it's part of Silicon Valley's hubris to assume that good will automatically win out in the end. That is, we've been mostly blessed, because the people putting such tools into practice are doing it for good (benevolent) reasons, but there's always a risk that someone else will do something much worse with it. It's a fantastic point, and one well worth thinking about, but I think the assumptions are a little bit wrong.

It's not necessarily a blind faith that "technology" and "capitalism" are flat out "good," but more a recognition that an expanding market tends to open more opportunities for everyone, and the end result of that expansion is good at a macro level. Capitalism tends to remove the barriers for growth, while technology (or, more specifically following Paul Romer's thesis, "ideas") are what then creates that growth. Capitalism is about removing the barriers, and technology and ideas are about enabling that growth. That doesn't mean that there aren't downsides to both -- but the net gain does appear. And, one thing that has become incredibly clear throughout history is that it's nearly impossible to take away that net gain once it appears. And, conversely, asking the government to create those net gains instead almost always fails, due to the difficulty in accurately regulating a market.

In other words, by removing the barriers and enabling the potential, you've almost guaranteed that when someone tries to use the tools for less-than-benevolent reasons, it only opens up strong demand for someone else to provide the equivalent (or better) in a benevolent way again. And, at the same time, in asking the gov't to manage the benevolence, you almost guarantee less opportunities to actually provide good tools, because you've added hurdles they need to jump through. Yes, there can be bumps in the road -- and, no, it's not always a fun process along the way. But enabling for growth is not blind faith. And, there are plenty of checks and balances in place that should these "benevolent dictators" turn authoritarian instead, the end result (or "revolt" as the case may be) can often be strong enough to deal with it.

So, yes, there may be some benevolent dictators in Silicon Valley -- but they'd be hard pressed to successfully ditch that benevolence without paying a huge price.

Related to this, I've recently been doing a presentation for various corporate execs (almost all from outside the US) on "What Makes Silicon Valley Silicon Valley." It's probably my favorite presentation, because it's fun and it usually challenges a lot of the assumptions many people have about why Silicon Valley has been so successful for so long -- that is, while it discusses some of the "common" reasons, it focuses more attention on the hidden, unexpected and accidental reasons for why Silicon Valley became what it did.

The last time I gave it, I ended up getting into a huge discussion with some European execs who pointed out that many of the explanations seem to run almost entirely counter to what many countries who try to set up their "own" Silicon Valley think. That is, many folks look at Silicon Valley and try to replicate the outward manifestations (a good university, some venture capitalists) and miss the underlying details that create the real culture of Silicon Valley, because they almost seem counterintuitive. And the most basic element of this is enabling the free exchange of ideas (that engine for growth). Instead of doing that, most focus on protecting ideas and limiting that free exchange, falsely believing that hoarding information beats sharing information (even with competitors).

So, what happens is that other countries set up their own Silicon Valleys by focusing on protectionism (greater intellectual property rules, non-competes, hugely funded labs), and ignore the power of the cross pollination of ideas and people throughout Silicon Valley, which make it that much more difficult for any single company to abuse the trust of the people they serve. Should any company turn away from benevolence, that openness almost guarantees a more open competitor shows up in return (sometimes with the same employees from the older company). That openness drives innovation, but also keeps these benevolent dictators honest.

Permalink | Comments | Email This Story
]]> is-that-any-way-to-build-an-internet? http://www.techdirt.com/comment_rss.php?sid=20080731/0216021848 Tue, 26 Feb 2008 20:56:35 PST Capitalism And Doing Good Are Not Mutually Exclusive Mike Masnick http://www.techdirt.com/articles/20080224/184002338.shtml http://www.techdirt.com/articles/20080224/184002338.shtml for profit entity, rather than the typical non-profit. The NY Times is now writing about this trend for new philanthropic organizations to also be for-profit organizations, recognizing that many of them have found they can do much more "good" by also focusing on a way to make a profit. As we pointed out when Bill Gates called for "kinder capitalism," a full understanding of capitalism would suggest that there's plenty of kindness baked in. There is benefit in doing good, and just because there's a profit motive behind some things, that doesn't mean it's at odds with doing good. It's great to see that more philanthropic organizations are recognizing that as well.

Permalink | Comments | Email This Story
]]> tie-them-together http://www.techdirt.com/comment_rss.php?sid=20080224/184002338 Thu, 24 Jan 2008 10:32:00 PST Bill Gates Isn't Calling For Kinder Capitalism -- He's Calling For Better Understanding Of Capitalism Mike Masnick http://www.techdirt.com/articles/20080124/08342958.shtml http://www.techdirt.com/articles/20080124/08342958.shtml dollars isn't "rational," as neoclassical economists would suggest. But, that's generally a misunderstanding of economics -- where it isn't money that's the driving force but the utility or the benefit that a person receives from any given action. Quite often, that benefit is in the form of money, but it certainly doesn't mean that it always needs to be. As we all know (but sometimes need to be reminded about), money does not equal happiness (utility). So, while it's a good thing to hear Bill Gates is giving a talk in Davos about embracing capitalist principles in urging companies to take up issues dealing with the world's poor, it's hardly a "different" capitalism or a "kinder" capitalism, as implied by the Wall Street Journal. It's actually just a more accurate understanding of capitalism -- where it's about decisions based on actual benefits, which include both monetary and non-monetary benefits.

Permalink | Comments | Email This Story
]]> it's-not-all-about-greed http://www.techdirt.com/comment_rss.php?sid=20080124/08342958