Why All Filmmakers Should Speak Out Against SOPA

from the you-can-never-stop-the-signal dept

There are many reasons why SOPA and other legislation like it should never be passed, e.g., it fundamentally changes how the internet functions, but here are just two things that should get you thinking:

1. In 1999, I was vehemently against media piracy. It was wrong, I felt, to "rip off" artists without their permission.
2. In 2011, I can say with absolute conviction that I was the one who was flat out wrong.

I've worked in the film industry for two decades as a screenwriter, director, assistant director, script supervisor, production assistant... I've seen a lot of change in the film industry in the last decade and realized at some point that I was witnessing a transition arising from the internet; the same transition that happened to the music industry in the 90s. For many of us in the music and movie industries, media piracy was a looming threat on the horizon, a planet killer whose orbit circled ever closer.

So I spent seven years trying to figure out the root causes of this transition and finally grasped a singular truth: media piracy was impossible to stop because -- in the longer lens of history -- media piracy was merely a symptom of a new technology (the internet) that many haven't yet understood how to monetize. Movie studios that built their empire on selling DVDs as units were threatened by the rise of the internet -- after all, how can you sell units if those units could be copied with impunity? But these were the same people who felt threatened by VCRs and those weren't the weapons of mass destruction they thought they'd be, were they? In fact, selling and renting video cassettes turned out to be a huge revenue stream for many, many years.

My 1999 self would have backed SOPA 100%. And that would have been a huge mistake. If I could go back in time, this is what I would have told my 1999 self:

1. SOPA won't even affect its target group. Those who infringe content have their own private networks outside the reach of prying eyes. So even if SOPA successfully took down a few sites, infringement would simply move elsewhere to areas more difficult for law enforcement to find. Not only that, the more important problem is that stopping file sharing doesn't encourage customers to buy.
   
   
2. The net sees censorship as damage and reroutes. The internet was created by DARPA. Being built by the military, its primary design was to allow a web of information to fix itself as network nodes were destroyed by nuclear blasts. Take out the Eastern seaboard? No problem. New pathways automatically arise to keep information flowing. This is the defining part of the internet. It's why we love it, why we use it, why it's vastly improved our lives and why it's created an entire industry that supports it.
   
   Okay, so here's the sucker punch: censorship -- or DMCA or SOPA takedowns, call it whatever you want, the internet sees it all as the same -- is interpreted as damage to the network, and automatically finds new pathways to get that information flowing again. By "automatically", I'm not just talking about the network itself -- its users are part of the internet that pro-actively makes their information (illicit or no) available if it's ever suddenly removed. Take down one web site and a mirror site emerges elsewhere. Kill that mirror site and another pops up. That's whack-a-mole on a global scale... and the moles posting illicit content far outnumber the whackers. Moreover, if the studios think piracy is bad now, wait until our current generation of kids -- now accustomed to "sharing" media online -- grows up and implements increasingly easier tools to circumvent egregious DRM. Software DRM is regularly broken within days of a software's release... and last year, Ubisoft's DRM was broken in only one day. That trend is only going to get more acute, not less.
   
   
3. You can't miss a future you don't yet know. Mike had a great post about how we can't anticipate what kinds of new jobs are created because we don't fully understand how new technologies will become integrated into society. Whenever something radically new comes around, it disrupts everything we understand about how things are supposed to work. Human nature is always to resist change unless there is a clear benefit, but with new technologies, that benefit is rarely clear. And for incumbent businesses whose profits are based on the benefits of old technologies, there is no clear benefit. To them, media piracy is a threat that needs to be quashed because it endangers the status quo. Everything they've built their studios on has come from a business model swiftly becoming obsolete. Of course they want to defend that -- who wouldn't? And so they pine about the good old days when they could make movies and just sit back on the money they made from box office ticket sales. They miss that.
   
   But what if they embraced the future and used the best attributes of the internet to create more opportunities, more jobs, more new content? Then they'd look back on all of us today and wonder what took us so long to make the switch. History shows us over and over that people resist change, then adopt change, transition to it, and finally laugh about how they used to love riding horses, or copying manuscripts, or listening to town criers, or reading newspapers... The future holds incredible possibilities, but you don't know what those possibilities are yet, so how can you say it could be the end of the movie industry when you don't even know what that future really is?
   
   In 1906, John Phillip Sousa testified before congress about the "threat" of phonographs:

   These talking machines are going to ruin the artistic development of music in this country. When I was a boy... in front of every house in the summer evenings, you would find young people together singing the songs of the day or old songs. Today you hear these infernal machines going night and day. We will not have a vocal cord left. The vocal cord will be eliminated by a process of evolution, as was the tail of man when he came from the ape.

   Sousa hated phonographs so much that he sometimes refused to conduct his orchestra if it were being recorded. In retrospect, it's painfully clear how misguided Sousa was: the music recording industry enabled more music to be brought to more fans and reinvigorated music worldwide. Now, our smartphone culture has morphed into recording everything. If it's not recorded, it's lost forever. Like Sousa's orchestra.
   
   Sousa couldn't have seen our future, but had he traveled here to see how our lives have been permeated with music because of the phonograph, upon returning to his own time, he probably would have missed the future.
   
   
4. Piracy is a symptom of a new technology. You can't stop piracy any more than you can stop spam. Everyone agrees we should stop spam or mitigate against it, right? So why not stop and/or mitigate against piracy? Because at least with piracy, there's a huge opportunity to create value by expanding your fan base. Spam has no such upside potential.
   
   Movie studios fear how media piracy will disrupt them, and with good reason. Studios look on with dismay as their once iron-clad monopoly on controlling digital content degrades, their bottom line shrinks, and some industry jobs are lost. They try to convince us that SOPA will save those jobs -- saving jobs is an intrinsic good, isn't it? -- but many jobs in legacy industries are lost as newer technologies gain prominence. Sure, I'd love my script supervisor's union to lobby studios to keep my cush job at $40-$50/hour pay... it's hard to argue against your own fat paycheck if it's putting food in your kids' mouths. Yet we'd all see that argument differently if I were lobbying the government for harsher legislation to protect my job as a horse buggy maker, a town crier, or a manuscript illuminator. Not all jobs deserve to be saved. The market does a pretty good job of sorting out which jobs need to be saved, and which jobs need to be excised.
   
   
5. "Piracy is a service issue, not a technology issue." This is perhaps the most important point of all... because it's actually been proven. It's frequently invoked by Gabe Newell, the man who runs Valve Software. Despite claims that the PC market for games has rampant piracy and it's impossible to make money in that market, Valve's software platform called Steam has done phenomenally well from selling digital content to PC users. When Valve was thinking about wading into the Russian market, they were told, "you’re doomed, they’ll pirate everything in Russia". Did Valve lean on Russian lawmakers for harsher anti-piracy laws? Nope. Instead, Valve offered a service better than what people were getting from pirates and Newell says that "Russia now, outside of Germany, is our largest continential European market." You'll never see Newell lobby for stricter legislation like SOPA because Newell understands how the internet works, why people pirate, and how best to compete with piracy.
   
   Only the movie studios who grok the true nature of the internet -- the ones who use the net to drive sales of valuable scarcities that consumers want to buy -- will restructure and thrive while those who don't understand how to compete with piracy will die off like the dinosaurs that they are. And good riddance to them. We should all be rewarding the smart ones who understand what the internet really is -- a global sharing network. Regulating it with overwrought legislation will just turn that precious resource into a dumbed down Chinese firewall. Harsher legislation will never stop piracy -- quite the reverse, piracy will get even harder to monitor than before -- but harsh legislation will cripple the internet as we now know it. No, thank you.
   
   The internet is already a highly litigious place for copyright infringement. SOPA, and all the other internet regulating legislation like PROTECT IP and E-PARASITE, will just transform the internet into something even more litigious. That's not a future any consumer or content creator should want to live in. If you get how the internet works, you can make gobs of money. If you don't, you should die off and not make everyone else's lives worse by passing laws that make everyone's online lives that much harder.
   
   
6. On the road to innovation, you remove roadblocks -- not add more. Think for a moment what life would be like for all filmmakers (and consumers) if YouTube had never gone online? Today we all accept YouTube at the center of our video lives because it instantly offers a huge array of content at our fingertips. The problem with SOPA is that it shifts liability -- massive liability, in fact -- and a ton of compliance costs onto internet companies like YouTube. In a post-SOPA world, the people behind YouTube look at the numbers and talk to their lawyers and wonder why they should assume so much more liability and extra costs. BLAM. There goes YouTube. BLAM. There goes Kickstarter. BLAM. There goes a bunch of other internet companies that used to provide the tools we needed to create, distribute, promote and monetize content. If this is all starting to sound like patent law gone mad, you're not far off.
   
   Thus, while SOPA's objective may be lofty, not only will it not accomplish its objective, but SOPA will actually end up hindering or stopping the kinds of services we need as storytellers and filmmakers. The net result: SOPA won't stop piracy, but it will make things much much worse for filmmakers by making all internet companies too gun-shy to create cool innovative technologies that we need. SOPA may help the big studios who like to think they're the only ones who can provide these kinds of services, but for all the rest of the filmmakers out there, SOPA is an awful idea.
   
   If SOPA had been in existence five years ago, we might not have had a YouTube today. Mull on that.

That's what I would have told my 1999 self. I doubt he'd have listened, though. After all, it took him seven years to come around.

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Ross Pruden's Favorite Techdirt Posts of the Week

from the favorites-favorites-and-more-favorites dept

Choosing my favorite posts this week has been a challenge because a single week of Techdirt posts is a lot to read and digest for me. Truth be told, I'm the world's slowest reader. I'd like to think it's because I have to frequently stop and re-read to grok the full import of each post... after all, there's always a nugget of insight to be gleaned on Techdirt. Not a week goes by without a delightful debunking, comic flip-off, outrageous abuse of trademark protection, or some new lesson in law or economic theory. While I often see the original articles on Techdirt in other places, I never miss a chance to read the commentary here on Techdirt.

Let's kick things off with two excellent comic flip-offs:

A musician names his album, "Kevinspacey". The real Kevin Spacey has his lawyer send a cease-and-desist letter because "Kevin Spacey" has been trademarked. (You could even do that? Huh. Another lesson learned.) And the musician's response? Relabel his album, Evinspacey. I already want to buy the album and I know nothing about it.

Writer makes an comment about Stetson hats. Stetson sends him a letter insisting he add the ® symbol when using their brand name. What was the writer's response? Stetson® hats suck. Hopefully, this will show the trademark attorneys that, sometimes, the best move is no move at all.

As for trademark abuses, Access Copyright claimed a trademark on the copyright symbol itself. Is there no end to the madness? Is our very DNA going to trademarked one day? As if that isn't bad enough, Disney slapped a trademark on Seal Team 6. As Mike put it, "I wonder if the Navy SEALs themselves will file a protest. I would imagine that you generally don't want to be on the other side of a dispute with Navy SEALs."

I learned more about the law this week as Mike explained how he had to file a Freedom of Information request about ICE's anti-piracy videos. These are the kinds of posts I really look forward to because they illustrate the law in action, something few non-lawyers ever have a chance to see:

…[T]he three Freedom of Information requests -- filed using the new system from MuckRock.com, an open government tool that seeks to publish documents retrieved via such requests and which recently built a tool to make it easier to make such requests (which I'm now testing) -- are as follows:

1. A FOIA request to the Department of Homeland Security, concerning the details of any licensing agreement with the City of New York or with NBC Universal directly.

2. A request under NY State's Freedom of Information Law concerning details of any licensing agreement with Homeland Security concerning the same videos.

3. Separately, a second request to NYC, concerning communications between the Mayor's Office and NBC Universal or the MPAA concerning the details behind those videos as well.

The NY State law says that the city must respond to my request within five business days. DHS has a longer period of time to respond.

It sounds small, but posts like this are a welcome reminder to me that the law isn't a nuisance to us, but is also there to serve us; filing a FOI request is iconic of that power.

In the same vein, I was very glad to see the stories about Amazon and Google not rolling over at the government's whim. First, Amazon says they won't pay taxes in other states unless the government says they have to:

...Jeff Bezos is claiming that such attempts to collect sales tax are unconstitutional without Congressional approval:

And in the U.S., the Constitution prohibits states from interfering in interstate commerce. And there was a Supreme Court case decades ago that clarified that businesses -- it was mail-order at that time because the Internet did not exist -- that mail-order companies could not be required to collect sales tax in states where they didn’t have what’s called “nexus.”

And that’s a very clear decision.

This is, of course, entirely accurate.

I've often wondered how Amazon was going to handle states demanding back taxes on sales within their borders. Always seemed like a sticky issue to me, and one which keeps cropping up in different ways. For example, Virgin's Megastore on the Champs Ellysees in Paris, France stayed open on weekends and the French government was fielding complaints from local shop owners who said they couldn't possibly compete with a big superstore like Virgin being open on Sundays. So the French government threatened Virgin with a big fine (if memory serves, it was about $100,000 a day) if they stayed open on Sundays. What did Virgin do? They stayed open. I can't recall how long they stayed open like that, but it seemed incredibly intrusive to me that the government would step in to prevent one business from competing in that way. In Amazon's case, it's the states who want a cut of Amazon's sales because they feel it's stealing business away from their state. But hey, too bad. Find a better way to draw customers to make purchases in state so you can keep your taxes. Don't go whining about how Big Bad Amazon is a moustache-twirling tax evader. Quite on the contrary, Amazon is saying they would pay taxes for interstate commerce:

Bezos also points out that Amazon would be perfectly happy with Congress stepping in and creating a sales tax system that works across states.

You have to hand it to Amazon. They know the law, they know their rights, and they're enforcing it. I welcome that. But the reason why this article is my favorite article on Techdirt, but not my favorite article on Slashdot, is the commentary: "This is, of course, entirely accurate." Were it not for that single trailing line, that I know is coming from a well-read lawyer, I might have read that Slashdot article and been clueless. Is Bezos exaggerating? Is he twisting the law to suit his needs? Who would know the answer? Techdirt is, bar none, a supremo bullshit detector.

Also great to see is Google's claim that they would fight PROTECT IP if it were passed because it would be disastrous to free speech. Most of the time I find that I'm against some new proposed law but I can't quite express why. As ever, Mike does it effortlessly:

...those in favor of PROTECT IP don't seem to understand the technology that they're regulating. So they don't realize that they're trying to create a "simple solution to complex problems," and don't recognize that they're effectively breaking the internet and infringing on free speech rights. It's not because they don't like free speech. It's because they don't understand what they're doing, and lobbyists for the entertainment industry insist this is needed to "fight piracy." The problem is that this won't "fight piracy" and will have massive unintended consequences. It's good that Google is willing to make this an issue.

I also got a weekly dose of lessons about statistics and economics from Techdirt as these two articles show. First, we have the superb, How To Lie With Statistics: France Pretends Hadopi Law Is Working. I lived eight years in France so I know a little something about how French culture works -- watching Hadopi unfold has been, for me, one part anguish and two parts interminable laughter. France seems to have a long history of its citizens electing their representatives... then rebelling against them. Yes, this is of course an imperfect over-generalization, but there is a measure of truth in it. On the one hand, the French respect authority, but on the other hand, they like to rebel against it. Hadopi is a classic case of a government program enforcing its top-down will on a people determined to disregard it. So it's no surprise to me that the actual data from Hadopi might be overstated. As Mike put it:

The government and various agencies are running around touting the claim that, according to their survey the HADOPI law has convinced more than 50% of users to stop file sharing. Problem is, that's not what the data really says. The real data shows that of people surveyed only 7% said either they "or someone close" had received a warning letter. Now, of those 7%, 50% claimed that they would stop infringing. Now, if you're playing along with the home game, you should have quickly realized that the actual percentage of people surveyed is more like 3.5% -- and I could argue that it's even lower for a few key reasons:

• The key question asked wasn't whether the individual would stop file sharing, but whether or not they or someone close to them had. Suddenly you have a big statistical problem, because -- to take an extreme example -- let's say that everyone in a town knows the one big file sharer who shares content online, but no one else in the town does. And, that guy knows and makes it clear that if he gets an injunction, he'll stop. Now, since everyone knows this guy, the reports from that town would be that 100% of people receive letters and 100% of those recipients would stop using P2P, even if that wasn't true at all. Including the "or someone close to you" makes the effective data pretty close to useless, because there's no way to separate out the overlap.
• The whole thing is based on a survey, which is notoriously unreliable in getting accurate data. People quite frequently answer what they think others want them to say, rather than what they're really thinking. And, when asking them if they'll stop engaging in illegal activity, many are simply going to say yes, even if they have no intention to follow through.

That first point reminded me of confirmed kills in war. If twenty people each saw the same person get killed and report that same person as a separate kill, the estimated dead can be a grossly inflated number. Yet one more lesson I learned about how to question statistical claims. Seems like the best way to assure a solid number is to have statistics done by your most skeptical opponents.

The piece on Limewire was also a gratifying read. Recorded music sales are up after Limewire was shut down, so that must mean mission accomplished, right?

Well, actually, no. Doesn't look like that at all. In fact, Nielsen doesn't even mention LimeWire's shutdown in its note about this, attributing much of the increase to the Beatles finally coming to iTunes. And, actually, if you look at the same Nielsen reports going all the way back to 2006, they show music sales going up each year. It's just that more of it is single tracks, rather than full overpriced albums.

And finally, three "classic" Techdirt articles. First, I loved how Mike wrote about Jonathan Coulton, an unsigned musician, who made $500,000 last year. How many exceptions must we list before we show that it's possible to make your own success if you understand business models and give fans what they want?

Second, the story of how Apple essentially gave the iFlow app developers an eviction notice:

…Apple is now requiring us, as well as all other ebook sellers, to give them 30% of the selling price of any ebook that we sell from our iOS app. Unfortunately, because of the "agency model" that has been adopted by the largest publishers, our gross margin on ebooks after paying the wholesaler is less than 30%, which means that we would have to take a loss on all ebooks sold. This is not a sustainable business model.

The iFlow developers go on to say they felt they did everything they could to ensure Apple was okay with their product, but then find out later that iBooks had been in development, and that Apple must have known about this conflict all along. Instead of Apple telling them outright, Apple effectively "jacked up the rents" so that it made no financial sense to stick around anymore. Rightly so, the iFlow app makers are furious. However, as Mike notes:

"...[T]his really shouldn't be too surprising. When you're making a bet on a closed system and relying entirely on that, it's inevitable that there are going to be issues. It's one of the reasons why we keep hearing more and more developers wanting to move away from developing native iOS apps towards developing more open standard apps, such as in HTML 5. Not only does it make it easier to build cross platform apps, but it also means they're not completely at the whims of a single company that's been known to reverse direction with little notice.

Finally, the story of the faux children's ebook that rocked the web. I personally received a copy of this ebook and was laughing so hard that, before I'd even finished reading it, I was already forwarding it to every parent I knew. Only after I'd hit the SEND button did it occur to me that I might have committed copyright infringement. While reading the Techdirt piece, I was happy to see that the hardcover book had reached #1 on Amazon, but also dismayed when I read, "Despite all of this, Akashic appears to believe that it's still in its best interests to go after those hosting copies of the PDF or graphics, and have them take it down." Wha??? Nobody even knew about this book before the pirated copies were distributed. Obscurity... piracy... obscurity... piracy... I choose obscurity!

These three posts were classic Techdirt because they pound at the heart of why businesses work or don't work in this new Digital Age: pre-internet, neither Coulton nor the children's ebook could have been as successful, and the iFlow developers made a fatal judgement about building their castle in someone else's walled garden. These stories all illustrate the insane power of the internet, but also how a clear understanding of how business models function in the changing marketplace provide an indispensable advantage over one's competition.

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How Facebook Used White Space To Crush Myspace

from the knowing-what-you-know-now dept

Mike talks a lot about disruptive innovation, about how -- despite all outward appearances -- newcomers can compete and even usurp the establishment (which are also called "entrants" and "incumbents" by Clayton Christensen). The examples are plentiful: Microsoft Money was outfoxed by Intuit's Quicken, Nike's pre-loaded iPhone app was leapfrogged by RunKeeper, Blockbuster was run into the ditch by Netflix, Kodak was surprised by the swift adoption of digital cameras... the evidence shows again and again that the size of the company and vastness of its resources do not necessarily guarantee its market dominance.

Gerd Leonard tipped me off to a great Forbes article by Adam Hartung called How Facebook Beat Myspace. For anyone who used both of those social networks, the grievances against Myspace are easy to list: too many ads, irrelevant ads, poor programming leading to browser crashes and typographic eyesores, letting users customize their profiles to such a degree that profile pages would either take too long to load (because of 50+ 10MB images) or the colors were simply too garish to view without getting a headache. Myspace, for all its fantastic social networking tools which had been hitherto unavailable, still had serious design flaws, and Myspace users saw Facebook as a better run and cleaner social network. That's why we all migrated.

Hartung bypasses the banalities of the user experience to examine the differences in business management approaches at Facebook and Myspace. He begins by rewinding the clock to remind us just how popular Myspace was at the peak of its success. If you remember, Facebook was a total nobody at that time. And then, something went awry... a change in the wind:

What went wrong? A lot of folks will be relaying the tactics of things done and not done at MySpace. As well as tactics done and not done at Facebook. But underlying all those tactics was a very simple management mistake News Corp. made. News Corp tried to guide MySpace, to add planning, and to use “professional management” to determine the business’s future. That was fatally flawed when competing with Facebook which was managed in White Space, letting the marketplace decide where the business should go.

"White Space" is a relatively new management term that Hartung advocates in his book, Seizing the White Space. Wikipedia describes White Space as the area in a business' hierarchy that exists between functions within the hierarchy, much like the unused space in your kitchen cupboard. White Space is the "handoff between functions where misunderstandings and delays occur", where "things often fall between the cracks or disappear into black holes". Hartung also calls White Space "a location for new thinking, testing and learning" in order to "evolve new formulae for business success free from the existing Defend and Extend culture."

Hartung then offers up the meat of his argument -- that Facebook conquered Myspace not because Facebook offered better features, but because it looked to its users for ideas and then created those features:

...the brilliance of Mark Zuckerberg was his willingness to allow Facebook to go wherever the market wanted it. Farmville and other social games -- why not? Different ways to find potential friends -- go for it. The founders kept pushing the technology to do anything users wanted. If you have an idea for networking on something, Facebook pushed its tech folks to make it happen. And they kept listening. And looking within the comments for what would be the next application -- the next promotion -- the next revision that would lead to more uses, more users and more growth.

And that's the nature of White Space management. No rules. Not really any plans. No forecasting markets. Or foretelling uses. No trying to be smarter than the users to determine what they shouldn't do. Not prejudging ideas so as to limit capability and focus the business toward a projected conclusion. To the contrary, it was about adding, adding, adding and doing whatever would allow the marketplace to flourish. Permission to do whatever it takes to keep growing. And resource it as best you can -- without prejudice as to what might work well, or even best. Keep after all of it. What doesn't work stop resourcing, what does work do more.

Contrarily, at NewsCorp the leaders of MySpace had a plan. NewsCorp isn't run by college kids lacking business sense. Leaders create Powerpoint decks describing where the business will head, where they will invest, how they will earn a positive ROI with projections of what will work -- and why -- and then plans to make it happen. They developed the plan, and then worked the plan. Plan and execute. The professional managers at News Corp looked into the future, decided what to do, and did it. They didn't leave direction up to market feedback and crafty techies -- they ran MySpace like a professional business.

And how'd that work out for them?

The tendency to plan for any daring enterprise is irresistible, and critically necessary in many cases. But Hartung's point is that innovation is a different beast from other types of business management. When you choose to innovate clever, competitive solutions to new market conditions, you have to be open to the possibility that you might create a newer business model that cannibalizes or "devalues" your current product or service. And so we arrive at the so-called Innovator's Dilemma -- do you tear down the walls of your temple to build a better temple? Or do you let someone else tear down your temple so they can build a better one? When you're an incumbent business like Nike, Microsoft, Blockbuster, or Kodak, you probably have so much financial investment in your legacy business model that you would rather turn a blind eye to all those young upstarts who seem to understand the market much better than you. After all, you have the experience, and they don't, right? Your staff went to Harvard and Duke and Stanford, right? Aren't your Excel spreadsheets of ROI projections your best protection against unexpected market reversals? You've produced 100 movies and they haven't, so what could these whippersnappers possibly know about the business of filmmaking?

Planning is of course essential for many parts of business but, Hartung notes, you really can't plan what people are going to respond to the most, and Zuckerberg understands that at a fundamental level. I once read an interview where the reporter noted how Zuckerberg constantly asks his colleagues, "Knowing what you know now, what would you do differently? And how do we get there?" This explains why Facebook revamps their site every six months... but also why Facebook continues to compete (and very effectively) with looming competitors like Twitter. (In passing, Netflix has also thrived from constant experimentation and listening to its users. Consequently, new features pop up on Netflix all the time that improve their service... and customers remain loyal because of that.)

But this point should not be glossed over. At the heart of Facebook's success is Zuckerberg's willingness to "destroy" Facebook to make it better and more competitive. Facebook was once the entrant, and now it is the incumbent and will stay the incumbent for as long as Zuckerberg retains the attitude of an entrant. Incumbents face a choice of abandoning much of their expensive infrastructure to adapt to a changing market, whereas entrants face no such choice -- quite the opposite, entrants have nothing to lose. They can try anything. Facebook crushed Myspace because Zuckerberg was focused on growing the user base by providing the things users asked for, rather than only providing the things that would grow the company's bottom line. Zuckerberg's second question, "How do we get there?" illustrates how he's constantly experimenting and building bridges from new and radical ideas to the current and static ideas. Myspace, being too preoccupied with planning, ROI, etc., never fully understood how important adaptability was to their business model.

Hartung concludes with the most important point of all:

MySpace demonstrates a big fallacy of modern management. The belief that smart MBAs, with industry knowledge, will perform better. That "good management" means you predict, you forecast, you plan, and then you go execute the plan.... Big failures -- like Circuit City, AIG, Lehman Brothers, GM -- are full of extremely bright, well educated (Harvard, Stanford, University of Chicago, Wharton) MBAs who are prepared to study, analyze, predict, plan and execute. But it turns out their crystal ball is no better than -- well -- college undergraduates.

There's an element of ego in play here -- legacy businesses are rarely humble enough to admit they can still learn from the newcomers, and that's to be expected. It's a convenient reaction to view emerging market developments as fads, gimmicks, or flavors-of-the-month and, as such, unworthy of diluting the company's resources by devoting extra time, money, and energy to research them. The fact is that many of these "fads" might very well be a waste of time and resources. By next year, they may have come and gone. And yet entrants view these "fads" with an open mind, and choose to tinker endlessly with them until the market reacts favorably to one of their experiments.

If anything, Myspace's spectacular failure underscores exactly how important it is to listen to others regardless of their experience or educational background. Yes, of course, experience is a factor in lending weight to someone's ideas, but good judgment is an equally important factor, if not more so. You needn't have had any experience producing horse-drawn carriages to make a sound judgment about how obsolete horse-drawn carriages would be with the coming automobile.

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