The Information Economy Is Not About Selling Information

from the bingo dept

What took me a whole series of posts to explain, Cory Doctorow has summed up succinctly in a column for Information Week: the "information economy" is not about selling information -- it's about using information to make everything else more valuable. The problem is that many in the US believe that the information economy is about selling information, and that mistake explains many of the strategic mistakes made over the past few decades that we've been describing here. Unfortunately, as we've been noting, the US has bet so strongly on the idea of the information economy being about selling information that it's pushing other countries to put laws in place that support the US's position on this -- and doing so under the false banner of "free trade." The purpose of real free trade is that it's beneficial to both parties through the efficiencies afforded by comparative advantage. In this case, however, these new protectionist policies are only beneficial to the US -- and, as Cory notes, this means they'll eventually be ignored. The benefit is too strong not to ignore them. And, once that happens, then it's those other countries that gain the benefits of recognizing that information makes everything else more valuable, while the US suffers under the modern equivalent of information mercantilism. It's not good for the US economy. It's not good for US businesses -- and yet due to this one incorrect belief, it's what we're left with.

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  • identicon
    Matt, 12 Jun 2007 @ 12:14pm

    Free Trade

    I really like how free trade has become about making restrictive IP laws that act as nothing less than a protectionist sop to American record labels and movie studios.

    reply to this | link to this | view in chronology ]

  • identicon
    Geoffrey Kidd, 12 Jun 2007 @ 12:34pm

    Wow.

    Mr. Doctorow has certainly aggregated his stercoraceous material!

    reply to this | link to this | view in chronology ]

  • identicon
    Charles Griswold, 12 Jun 2007 @ 1:05pm

    Giving It Away

    I like the first line of Mr. Doctorow's Giving It Away article. "I've been giving away my books ever since my first novel came out, and boy has it ever made me a bunch of money." Kudos.

    reply to this | link to this | view in chronology ]

  • identicon
    JohnB, 12 Jun 2007 @ 1:09pm

    Tired Old Arguements

    As usual, Mike is posing as an economist when he is not one. And he's implicitly making the same wrong-headed assumptions to make his case. Creating information and, especially knowledge, is not free. If no one pays for it, then a lot less of it will get created, especially in formats that are widely useful.

    Mike tries to legitimize his claims by quoting another author. Unfortunately, the other author also only poses as an economist and makes several factual misrepresentation (aka mistakes), which reveal the lack of any expertise in international trade. These mistakes include the following:

    "Any fellow signatory to the WTO/TRIPS can export manufactured goods to the USA without any tariffs" - This is simply not true. WTO signatories agree to abide by certain rules and to use the WTO to settle any differences of opinion, etc. with regard to trade. Tariffs on manufactured goods do NOT go to zero under WTO. Check out the harmonized tariff schedules if you don't believe me.

    "the monthly Russian per-capita GDP hovering at $200" - actually, the monthly GDP of Russia is colder to $1,000 per month (https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html), roughly FIVE TIMES the amount quoted in the article.

    These two mistakes (and especially the first one) are so basic to understanding international trade that they serve to undermine anything else the article says.

    Here is another gem:

    "The information economy is about selling everything except information" - This is such a bogus statement I hardly know where to begin. Selling information is a huge industry. And it always will be. Companies spend quite a bit of time and money gathering information and they do not plan on giving it away. Sure, hackers will occasionally hack in and then use or publish the data they steal, but these hacked data files a miniscule compared with the mountains of data that companies collect, store, use and sell. This is not going to change.

    People can make illegal copies of published works, and this will continue and it will take a bite out of the profits of the authors and publishers of the materials they steal. This will discourage investing time in the significant amount of work it takes to publish a book or piece of music or painting, etc. People will also continue to steal candy bars from 7-11, break into houses and steal stereos, etc. That does not mean we should just resign ourselves to it and make it legal.

    While there is a legitimate point in that stealing data does not in most cases remove that data from the original owner's database/file/machine, etc., something of value has still been taken, and, to the extent that people access the stolen data instead of purchasing it from the originating person/company, the people who created the data still lose something and make less from something that they created than they otherwise would.

    Mike, stop trying to justify stealing by using your tired, amateurish, refuted theories. Try living somewhere where property is not protected by the law and see how you like it there.

    reply to this | link to this | view in chronology ]

    • identicon
      SailorRipley, 12 Jun 2007 @ 1:24pm

      Re: Tired Old Arguements

      (this is just too easy...)

      "People can make illegal copies of published works, and this will continue and it will take a bite out of the profits of the authors and publishers of the materials they steal."

      copyright infringement is not theft

      "This will discourage investing time in the significant amount of work it takes to publish a book or piece of music or painting, etc."

      it takes very little time, investment or work to publish a book or piece of music or painting. The bulk of the work is creating it, not publishing...

      "These two mistakes (and especially the first one) are so basic to understanding"..."that they serve to undermine anything else" your post "says."

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 12 Jun 2007 @ 1:29pm

      Re: Tired Old Arguements

      Selling information is a huge industry. And it always will be. Companies spend quite a bit of time and money gathering information and they do not plan on giving it away

      With the exceptions of Google, MSN, broadcast radio/TV ...

      reply to this | link to this | view in chronology ]

    • identicon
      DCX2, 12 Jun 2007 @ 1:41pm

      Re: Tired Old Arguements

      If no one pays for it, then a lot less of it will get created, especially in formats that are widely useful.

      1) I don't think Mike said anything about not paying for anything. Being non-sequitor in the beginning of your post doesn't bode well for you, especially given the length of the post.

      2) No one paid for the modding community to mod the original Quake. There were lots of really great mods for Quake, though.

      Remember, the profit motive is not the only motive in the world. In fact, I would say that the profit motive is less successful at generating desirable content than the love motive.

      Selling information is a huge industry. And it always will be.

      Is this really desirable, though? Maybe it's desirable for the people with a profit motive, but what about the people whose information this is about? What if they don't want it to be sold? Should they be given a choice? Are they given a choice?

      reply to this | link to this | view in chronology ]

    • identicon
      DCX2, 12 Jun 2007 @ 1:50pm

      One more thing...

      While there is a legitimate point in that stealing data does not in most cases remove that data from the original owner's database/file/machine, etc., something of value has still been taken, and, to the extent that people access the stolen data instead of purchasing it from the originating person/company, the people who created the data still lose something and make less from something that they created than they otherwise would.

      Every pirated copy is not a lost sale. What are you, the BSA?

      1) Some people would never have bought it. (never would have made the sale)
      2) Some people buy it and pirate it. (made the sale anyway)
      3) Some people would buy it if they could afford it. (partial lost sale due to supply/demand curve being at the wrong place)

      Some piracy could be considered theft of a potential sale. But, certainly, not all piracy.

      Mike, stop trying to justify stealing by using your tired, amateurish, refuted theories.

      I've never seen Mike justify stealing. I've seen him indicate that the content industry is trying to fight their own customers, and I've seen Mike suggest business models where they aren't fighting their customers like they are criminals, but I've never, ever read anything that suggested Mike is seeking to justify taking someone else's creation against the creator's will.

      reply to this | link to this | view in chronology ]

    • icon
      Mike (profile), 12 Jun 2007 @ 3:06pm

      Re: Tired Old Arguements

      And he's implicitly making the same wrong-headed assumptions to make his case. Creating information and, especially knowledge, is not free.

      John, I'm not sure why you keep saying that no one pays for stuff. That's not the argument we've made at all. Yes, absolutely it costs money to create information. I've never said otherwise. In fact, that's a key point in the business model I've described.

      Where you're confused is you think that paying directly for the information is the only way to monetize it. That's absolutely false.

      If no one pays for it, then a lot less of it will get created, especially in formats that are widely useful.

      Again, we're not saying no one pays for it. However, the idea that "less" will get created without IP laws is false. Go look at the research about how IP laws tend to decrease creative output. Study after study has shown that stronger IP laws have a negative impact on creation of content.

      Understanding why is pretty simple. Without IP, creators rely on other business models that encourage them to keep creating content. With IP, they have incentives to rest on their laurels and just keep charging for old content.

      So, your assumption is wrong. Look at the research.

      Selling information is a huge industry. And it always will be.

      No. That's simply not true. People sell *access* to information. Or they sell *aggregating* the information. Or they sell *filtering* the information. Or they sell the *creation* of information. The information itself they're not selling.

      Almost every information business fits into one of those business models: aggregating, collecting, filtering or creating information. Each of those is a service, not a product.

      This will discourage investing time in the significant amount of work it takes to publish a book or piece of music or painting

      This shows a total lack of knowledge about history and economics. Go look at the research and get back to me.

      the people who created the data still lose something and make less from something that they created than they otherwise would.

      This is false. There is no "loss" there is a marketing failure. They have failed to get someone to buy. That's different than a loss.


      Mike, stop trying to justify stealing by using your tired, amateurish, refuted theories.


      First of all, I'm not justifying stealing. I'm not even justifying infringement. I have said repeatedly that it's illegal and I do not suggest anyone do it. DO NOT put words in my mouth when they are the exact opposite of what I've said. It suggests you are reacting emotionally, rather than intelligently.

      As for "refuted" theories, you have yet to refute them or point to any evidence that refutes them. I have a whole stack of research here that all seems to support the points I've made.

      Try living somewhere where property is not protected by the law and see how you like it there.

      You are confusing infinite goods with scarce property. Property is one thing. Ideas are something entirely different. Pretending one is the other doesn't get you very far.

      reply to this | link to this | view in chronology ]

  • identicon
    Confused..., 12 Jun 2007 @ 2:30pm

    Pushing other countries?

    After reading this and the linked article, I wonder if Mike actually read the article he references. When Mike says "pushing other countries to put laws in place that support the US's position on this..". The IW article clearly states that the US provides tariff-free trade if the signing countries agree to honor our copyright laws. Simple.

    If you don't like our laws, sell your crap elsewhere, or pay the tariff.

    I agree that not all intellectual property is protect-able, but stealing is stealing, and I get sick and tired of the excuse that since millions do it, oh well...

    If you want to break a law, be willing to suffer the consequences.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 12 Jun 2007 @ 3:05pm

      Re: Pushing other countries?

      Dear Confused,
      You really are. Proposing other business models is not stealing.

      reply to this | link to this | view in chronology ]

    • icon
      Mike (profile), 12 Jun 2007 @ 3:09pm

      Re: Pushing other countries?

      The IW article clearly states that the US provides tariff-free trade if the signing countries agree to honor our copyright laws. Simple.

      Right. "Honor our copyright laws" by passing laws in their own country that are often even more draconian than our laws.

      If you don't like our laws, sell your crap elsewhere, or pay the tariff.

      You seem to be confused here. The point is that in setting up these protectionist policies, we're actually harming our own economy -- just as any protectionist policy eventually leads to problems.


      I agree that not all intellectual property is protect-able, but stealing is stealing, and I get sick and tired of the excuse that since millions do it, oh well..


      First of all, recognize the difference between stealing and infringement.

      Second, we have NEVER said that it's ok. We have said that people shouldn't do it. What we've said is that *FROM THE PRODUCERS' STANDPOINT* you can be better off ignoring IP laws.

      Why do you put words in my mouth that are the exact opposite of what I say?

      reply to this | link to this | view in chronology ]

    • identicon
      Rob from Oz, 12 Jun 2007 @ 3:16pm

      Re: Pushing other countries?

      Living in a country that is a recent victim of a free trade agreement with the USA, I have to take issue with Confused...'s comment. "Agree to honor our copyright laws" sounds so nice, but so misrepresentative of the US position.

      The US's position was more like "you change your (Australia's) laws to make them closer to out laws (such as the DMCA) and by the way, we don't like the way your copyright, patent and pharmaceutical laws work together to restrict our (US) companies abilities to make profits in Australia, so change those too. BTW, we'll keep our own tarif protection for our own interest groups anyway." The drive was really from the US to get the FTA so that it could break down barriers in Australia - and since the FTA was implemented, the balance of trade has moved further in the US's favour.

      There is also a BIG difference between suggesting companies have got it wrong by charging for information instead of supplying it free as a leverage point for selling other services and/or products and breaching copyright (AKA "Stealing"). I have not seen anything on techdirt that suggests stealing is an appropriate response - except in the comments.

      reply to this | link to this | view in chronology ]

  • identicon
    Buzz, 12 Jun 2007 @ 3:18pm

    It never ends...

    As DCX2 pointed out, Mike has never once condoned (indirectly or otherwise) stealing content. He points out that piracy is a strong indicator of where the market is headed, but everyone compulsively tacks onto the end of those sentences: "... therefore, we should all engage in piracy because piracy is good." He refers only to the changing marketplace and how those who cleave unto the old business models will be left in the dust. The only reason those old models are still alive is that the new models are still developing. The old business models are deeply rooted in society, so it is hard for most people to grasp this concept of giving digital content away for free.

    As for those who insist on calling piracy "stealing", it has already been clarified to be copyright infringement. We are dealing with information and ideas, not trophies and artifacts. If certain companies had their way, we would be arrested for humming our favorite tune in public. Where is the line? Do I have to play my protected music only at home where no one else can hear it? Can I play at my place of work? Is it infringing if my neighboring co-worker hears it too? Can I lend my whole computer loaded with thousands of songs (with DRM) to a friend? What exactly are my rights with this piece of data on my computer? Why can't I transfer those songs to other music devices?

    There are businesses (both inside and outside the music industry) that thrive very well by giving away their non-scarce resource and charging money only for scarce premium services. Stop trying to claim that Mike is making this stuff up!

    reply to this | link to this | view in chronology ]

  • identicon
    rcyran, 14 Jun 2007 @ 8:07am

    The author of the article is conflating two ideas –
    I think he’s spot on describing how IT is increasing efficiency in the “physical” economy

    But then he uses this point to justify an unrelated point (or at least one he didn’t seem to justify in the article)- information businesses shouldn't charge for much of what they produce/US shouldn't try to enforce IP protection on other countries. I think he's wrong on the second point - patent protection does generate additional research, products etc in some cases - e.g. pharma

    Here's the quote:
    "This stuff generates wealth for those who use it. It enriches the country and improves our lives. And it can peacefully co-exist with movies, music, and microcode, but not if Hollywood gets to call the shots. Not if IT managers are expected to police their networks and systems for unauthorized copying -- no matter what that does to productivity. Not if our operating systems are rendered inoperable by "copy protection." Not if our schools are conscripted into acting as enforcers for the record industry.@

    reply to this | link to this | view in chronology ]


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