Saturday, December 26, 2009

A Christmas Present

What more could I ask for?

Wine. Innovation. A blow against government over-regulation. A story about a penniless Yugoslavian immigrant. Capitalism. And whooping some French ass. All from

Merry Christmas to all, and to all a good night.

Monday, November 23, 2009

Adding Value, Reducing Cost

I was listening to This Week in Google (Ep. 17), and I once again heard Jeff Jarvis say (quite correctly) that internet efficiencies "add value and reduce cost". Jarvis is famous for saying about the Internet-connected economy, "middlemen are doomed". Again, he's right.
Most importantly, he said that "Google kills waste". The question I have is "how much of the U.S. economy is based on waste management?"
I've gone on at length about this topic before, but I'm going to try and boil it down. If you want the long-winded version, start here.
In the Industrial economy of the 20th century, people who weren't getting paid extracting raw materials or pounding them into something useful, were being paid for coping with the inefficiencies inherent to acquiring the materials for, producing, promoting, or delivering, material goods. (Sure, some were being paid for handling Intellectual Property and not material goods, but I think we all know where that's heading).
The Internet is drastically reducing these inefficiencies. They are no longer inherent.
We've watched the U.S. economy move from a production-based economy to a service-based economy. Now, the Internet is making us an increasingly self-service based economy. This is the value that Jarvis is crediting the Internet for--the public is adding value for the public (for nearly free, free, or less-than-free), on top of internet platforms. We are promoting and distributing music. We are acting as our own travel agents and realtors. We are making gourmet meals in their own homes and sharing cooking tips and recipes online. We are doing our holiday shopping on the internet, away from brick-and-mortar stores and their sales staff. We are reporting the news on twitter. We are filming it on Youtube. We are providing analysis on blogs.
Inside of corporations, information technology is streamlining management and flattening the org charts, reducing the "middlemen" inside every industry. It's not just affecting the industries that act as "middlemen". It's affecting the middlemen of every industry.
So... What percentage of U.S. consumers make their livelihood as "middlemen" (in this broadened sense)? How many U.S. jobs are the "cost" that's being reduced?
Once upon a time, we were afraid that technology (in the form of automation) was going to undercut the blue-collar labor market (turns out, Southeast Asia's cheap labor beat the robots to the punch.). But in the 21st century, it's white-collar jobs that have to be aware of their tenuous position, as technology (in the form of I.T.) eliminates or reduces the need for their jobs. I say this as a warning to prepare for it, not as a call to fight in vain against it.
In the next century, we're going to find out that there's a lot of stuff we don't have to pay for that we are used to paying for. At the same time we'll find out that a lot of us are getting paid for things that don't need doing anymore (at least *as a profession*). We should work towards making this transition as smoothly as possible.
If you have a young child today, my suggestion is that you send them into medicine, engineering, education, or teach them how to drive a UPS truck. Almost any other job I can think of is one that we'll do for ourselves or for each other for free, thanks to the efficiencies the Internet is bringing us.

Sunday, November 15, 2009

Education, Attention, and Maker Time

Watching Meet the Press this morning, I was really struck by the honest assessment of the state of the U.S. educational system by Sharpton, Duncan, and Gingrich. President Obama has tasked these three with assessing and identifying the elements of successful K-12 education in the U.S., and empowering it.

{Brief aside - Thank you MSNBC for this fantastic editing tool, where I can highlight the text in a transcript, and embed just the video for the highlighted portion. So easy, so powerful, so useful. I can search and edit in text, and publish and embed in video}

This led me to think of what Matt Dugener said in his TEDxDetroit talk about Michigan, and the culture we have in this state towards entrepreneurs and enterprising individuals. The whole thing is worth your time, but I want to focus on the idea that, in Michigan, we train our children to be excellent employees, but poor entrepreneurs.

Have you ever considered how we teach our children? The modern classroom is largely an artifact of the Industrial Revolution. Only for the past 150 years or so has the education of children been so formalized, largely devoid of "play", and structured. (Stefana Broadbent makes some other interesting observations about the rituals of the modern education system in her TED talk). Certainly, advanced subjects require rigorous study, but are we going about that rigorous study in the best way? Students are given sixty minutes of a subject, and then 10 minutes to switch gears into a different subject and provide their undivided attention once again.

In effect, we're conditioning our children to what Paul Graham calls the Manager's Schedule: days divided into blocks of a single hour. Graham contrasts this to the Maker's Schedule (blocks of at least half a day) where creative types get settled into a problem. If you've ever experienced what it means to be "in the zone" with a project, then you know how important the maker's schedule can be to creativity or complex problem-solving. The manager's schedule works great for mid-level management, who largely serve to role of information funnel to management above them--a function that's critically important to large, vertically-oriented organizations. However, today's fastest growing organizations aren't vertically oriented monoliths like they were in the 20th century. They're nimble, creative, innovative, and decentralized. They depend on products of the maker's schedule, not the manager's schedule.

Conditioning children to live on the manager's schedule not only robs them of the time to settle into and play with important ideas, but it conditions them for employment in vertically-integrated, highly structured organizations--exactly the kinds of organizations that are going to have the hardest time surviving in the 20th century. This kind of education makes sense for industrial society, but it runs counter to the kind of education today's students are going to need in a creative, innovative, post-industrial economy. When children have difficulty conforming to this unnatural form of learning-without-playing, we label them with learning disabilities when what we really have is a teaching disability. Worst of all, we're conditioning our children for a work environment that won't exist in a post-industrial America: an environment where work life and home life bleed into each other, the 8-hour day is a thing of the past, and complex problems aren't easily broken into simple repetitive tasks to be managed towards efficiency like an assembly-line.

We're beginning to shift from a society that values time-management skills to one that values attention-management skills. At the same time, we're training our children to neglect deeply engaging their attention with a single subject, and instead, teaching them simply how to juggle their time.

Wednesday, November 11, 2009

Michel Bauwens, and the Crisis of Value Theory

Once upone a time, Jeff Jarvis wrote the words "bits, not atoms", and sent me down a rabbit hole that I have yet to climb out of.

I've got a statement for you to chew on with me, written by Michel Bauwens:
1) The creation of non-monetary value is exponential
2) The monetization of such value is linear
Bauwens cited one of my posts over at the P2P Foundation's blog, and tripped off the usual technological alarms that send me scrambling for any mention of my name or writings. I'm rattled by how big this man thinks, and that he'd bother to cite my writings on what I had been calling "innovation deflation."

Bauwens' post sent me off to his "Recapitulating the Crisis of Value Theory" article, where I found the statements at the top of this entry. It is a profoundly formal definition of the ideas that I was toying with when talking about innovation, efficiency, and deflation.

I don't have a great deal to say in this post (yet), but I've only begun to wrestle with Bauwens' theory, and I thought it deserved more than a Tweet. I just know that I'm going to have to come back to it, and I needed to give it a permanent home on this blog to anchor my thoughts.

Give him a read. Share your thoughts.

Saturday, November 7, 2009

This *is* the Droid You're Looking For: Verizon Droid

[Updated 11-12-2009]

I don't normally do tech reviews, but after playing with my new Droid from Verizon (Motorola, Google), I had to share some of the love. I've got about 15 friends waiting for me to do the recon work before they dive in, so I thought I'd collect my thoughts here. It also will provide a sounding board for friends who've joined the Church of Jobs, and want to yell at me for deviating from the One True Faith.

I support a great many iPhones at work, and I love the device, but the Droid makes the iPhone look a little tired. It's not necessarily a huge leap beyond the iPhone (except for the display, which really is profoundly better, with twice the iPhone's screen resolution), it's just all around more solid.

I won't review the features here, there's plenty of that data all over the web already. I will say that the actual phone is just spectacular (you know... that one app that all smartphones are still trying to do right?) . The sound is crystal clear, and I get reception in locations my last three phones didn't. This alone makes it substantially better than the iPhone for me. (Not to mention that Verizon's network beats the stuffing out of AT&T).

If you're a heavy Google user (Apps/Voice/Gmail) then you're really going to love this phone: seamless integration with your existing Gmail contacts (not to mention facebook--half my contacts in the Droid are displaying their facebook profile picture now).

Advice: Buy the dashboard mount and car charger. The turn-by-turn GPS navigation on this thing is better than most TomToms. After you get used to asking your phone to navigate you to a destination with voice commands, or to make some calls for you, you'll find that you keep talking to it, just to see what it can do. I'm going to have to give it a name if I keep this up.

Most likely, if you're new to the Droid today, you're also new to the Android OS from Google. Navigating the sea of apps for the Droid can be a bit daunting. Here's my out-of-the-box suggestions for mandatory free Apps, in no particular order:

1) Facebook: It probably came pre-installed. Mine did. Use it to sync your contacts with. It will grab your friends phone numbers from their profiles, and load you up.

2) Pandora: If you use Pandora already, sign into this app, and your radio stations are at your fingertips. Again, combined with the car dock and charger, you should get a lot of mileage out of this app.

3) NewsRob: Use Google Reader as your RSS reader? NewsRob syncs up to Google Reader, and has all the features that Reader does (Share, Star, etc).

4) Shazam: Can place the name of the song your listening to? Let Shazam identify it for you, as well as tag it in a list for your hunt down on Amazon MP3 later.

5) Google Sky Map: Augmented Reality for the night sky. This is one of those apps that dances on the border of magic and technology. Wow your friends with this one on a clear night.

6) Color Flashlight: Silly little app, but terribly handy. Gives you a bright white screen to use as a flashlight, as well as other colors/effects. Turn on the strobe. Combine with Pandora for portable Raves.

7) ShopSavvy: Another Wow-Factor app. Scan a barcode, check prices on the internet, and a store locations near you via GPS.

8) Google Calendar widget: Use Google Calendar? drop the widget onto one of your three desktops for constant schedule-at-a-glance. If you're syncing with Exchange at work, put the Corporate Calendar widget up right next to it and try and keep your work from bleeding into your play.

9) Twidroid (app) or Twidgit Lite (widget) : Twidroid is generally regarded as the best Twitter client app for the Android, but Twidgit is a widget, not an app, which I much prefer. Take your pick.

10) Google Voice: OK, this one is a big leap for people, but I was a Google Voice user before I got this phone. If you use Google Voice, this phone is heaven. Seamless integration with Google Voice mail, as well as allowing you to dial out from your Google Voice number instead of the real number of your phone. If you're not yet a Google Voice user, now may be the time to jump in. If you want visual voicemail from Verizon, you'll have to from $3/month for the privilege, and it doesn't transcribe voicemails to text like Google Voice does. Otherwise, you'll be connecting to your voicemail box like you always have, spending 45 seconds navigating phone trees to hear your friend leave you a 2 sec message saying "call me".

[Updates and Additions]

Since writing this, I've snagged a few more essentials:

Mother TED: Are you a TED addict? Get your fix directly through an app. It supports tagging, searches, etc. AND IT DOWNLOADS TED VIDEOS RIGHT TO YOUR PHONE! Seriously, what more do you want short of jacking the phone right into your skull?

Weather Channel: A great weather forecast app, with support for widgets. Set a home location and it will appear in the notification bar at the top. So tasty.

Google Listen: Are you a podcast junkie? Look for your favorites on Google Labs' Listen app. No need for syncing your subscriptions with iTunes or Zune anymore, just get them delivered directly to your phone.

WiFiScanner: This is a great app, and has let my Droid replace my netbook and kismet as my WiFi site survey tool. Returns signal strength in dbm, and has an autoscan mode forconstant data updates. Maybe this one is a bit specific to Network Engineers and WarDrivers.

RPN Calculator: Again, over on the geeky side, if you need an RPN stack to use a calculator correctly, this is it. If you don't know what Reverse Polish Notation is, then nevermind, you'll think the app is broken. :-)

gTasks: I'm still on the lookout for a better app to sync my task list from Google (preferably one with widget support). Until then, this clean little app will do the trick.

Did I miss anything? Please share your favorite apps in the comments. Or tell me all the ways that the iPhone is better, and where I can shove my Droid.

Thursday, October 22, 2009

TEDxDetroit - Where Do We Go From Here?

I've given myself a day of reflection on TEDxDetroit before writing about it. I wanted to 1) let my head stop spinning from all the great ideas I was exposed to, and 2) allow some time for the Kool-Aid to leave my system and give the conference a more objective treatment.

I wanted to get these thoughts down while they were fresh, but as soon as the videos are available from these talks, I'll be sure to update the post to include them. Until then, forgive me if I don't offer a complete synopsis of the talks.

First off, if you're unfamiliar with TED or the TEDx concept, take a look at this piece in TIME about the TEDxDetroit conference for a little background information, or check out Chris Spiek's synopsis at Positive Detroit. Of course, you could visit and spend some time with a few of the videos there.

Charlie Wollborg, Terry Bean, Catherine Juon, Derek Mehraban, et al. did an incredible job lining up some real heavy hitters for the conference. The speakers were truly excellent, and their talks insightful, concise, and potent. Kudos to these folks for their herculean efforts.

The AM session's highlight was Rich Sheridan (read about him in Forbes) from Menlo Innovations, talking about design, particularly when it comes to software. His talk was titled "End Human Sufferring as it Relates to Technology". He really drove home the point that most people are slow to adopt tools and software whose interface gets in the way. No matter how powerful or useful the product, the utilization won't ever happen without clean and easy design. As a technologist, I often cite that if someone needs to understand technology on my level to use it, then that technology is *broken*.

The PM session really ramped things up. Chazz Miller was electrifying, showing off all the work he's done with Public Art Workz already, and all the work that was to come. His most touching moment was talking about the inspiration for this mural in Brightmoor:

Matt Dugener (COO of Enliven Software) gave a great lecture on "Building an Enterprise Class in Michigan". It was a real eye-opener for me. He says that, in Michigan, we've taught our children for generations to be good employees, but not good employers. He also says that Michigan has tremendous economic assets, but they're all locked behind closed walls in a command-and-control structure that worked for making cars, but is anathema to innovation. Definitely give this talk a listen.

Paul Schutt, Issue Media Group, really did a nice job talking about the mechanics of media, and how they affect the Detroit area. Now, I don't go in for the media claptrap (more on that in a minute), but Schutt had hard data! (My favorite). He nimbly discussed the long tail economics of the Michigan job market, and showed us that the jobs in Michigan being created are out along that long tail, not in the Big Butt. He notes that the only thing that traditional media can pay attention to, however, is the Big Butt. When GM cuts 2,500 jobs, it's on the front page. When 20 startups employ 25 people each, it goes unnoticed. I think combining this information with what Matt Dugener said in the talk previous about command-and-control structure reveals a great nugget of Michigan truth: We're conditioned to feed ourselves as cogs to the Big Machine. Anything else seems insignificant to both ourselves (Dugener) and the Media (Schutt). Schutt then goes on to show how he's waging war on this old-style media and its shortcomings with ModelD, and the rest of the publications from the Issue Media Group.

After Schutt, poet D Blair hit the stage and offered a reading of "Detroit (While I Was Away)". I literally thought the crowd was going to rise up and carry him out of the auditorium on their shoulders. Luckily, it was captured on a Flip camera, so I can share it with you now:

TEDxDetroit video: Poet D Blair performs 'Detroit (while I was away)'


So fellow TEDxDetroiters, where do we go from here? So many good ideas and so much energy was harnessed and focused at TEDxDetroit, I can't stand to see it just dissipate! I'm assuming that the TEDxDetroit web site will be the clearing house for information about this event and future events, but I hope we have more than a hashtag holding us together in this journey we've embarked upon.

So what do you think? Lobby for a shared blog on the TEDxDetroit site? Discussion boards? A whole new project? Existing platforms like Motor City Connect or Facebook? Is it even worth trying to build more formal connections?
I want to hear your suggestions, thoughts, and ideas. Keep sharing.

Saturday, October 17, 2009

Sonoma Trip Breakdown - Day 3

Up and at 'em early on Saturday. Chris had to work, but she left us a lovely note.

Richard took us up to Iron Horse for a tasting.

They had a Pinot Noir there that I consider to be my new baseline for what a Pinot Noir should be. It is the taste that I imagine when I imagine Pinot Noir. Danielle picked up a pair of Bourdeax style cabernet blends there.

After Iron Horse, it was off to the Redwood Forest for some photography. These pictures can't do the forest any justice. You feel so utterly small inside there.

We had a satisfying, yet somewhat unremarkable lunch up in Healdsburg (at least I got to see the final score on the Michigan game, ouch!), and then ducked over to Seghesio to sample the Zins.

Now, both Danielle and I are huge fans of Seghesio Zinfandel, so this was a much-anticipated stop. We were really looking forward to getting a taste of some of the zins that aren't in wide distribution. As expected, these Zins were great, but I didn't find them to be that much above and beyond what we can get from Seghesio back home. We snagged one of the bottles, and headed back to meet up with Chris after work so Chris and Danielle could hit some antique stores, while Richard and I did some tech fiddling around his house before heading back to Detroit in the A.M.

What a great trip!!

Friday, October 16, 2009

Sonoma Trip Breakdown - Day 2

We started today by dropping off Chris and Danielle for some antique shopping Healdsburg, while Richard and I headed to a few tasting rooms. We started at Dry Creek Vineyards.

They were wise to practically mandate a taste of their '08 Dry Chenin Blanc, a wine that may easily be overlooked. It shouldn't be. They also
had a Late Harvest Zinfandel dessert wine that was too tasty not to pick up. I bought a bottle of each.

Here are the wines of note:
* '08 Dry Creek - Dry Chenin Blanc (purchased)
* '06 Dry Creek - Dry Creek Valley Cabernet Sauvignon
* '05 Dry Creek - Dry Creek Valley Merlot

All of those should be distributed widely enough to find out of town.

* '06 Dry Creek - Late Harvest Zinfandel (purchased)

After Dry Creek, we headed across the way to a
n old favorite, Teldeschi.

I've had great experiences there before, and have sent a few friends to visit when I heard they were heading out this way. They make some seriously killer Zinfandel. I must've tried a dozen wines (thanks to Richard's insider status), but here's what I picked up:

* '05 Teldeschi - Dry Creek Valley Zinfandel (I got an extra for a friend who demanded that I bring a bottle back for her).

* '05 Teldeschi - Dry Creek Valley Cabernet Fra

Lastly, we zipped down the road to Unti. They normally only do tasting by appointment, but they were kind enough to squeeze us in, and we were treated like all-stars there. We got to try some truly outstanding wines. The folks at Unti really make the most of their outstanding Grenache grapes. UNTI was clearly the big hit of the trip. Not only did I pick up 3 bottles to bring home, but Richard picked up another for dinner on Friday night, and Saturday, out at Russo, we had a 5th (the '06 Barbera). Here's my pickups from UNTI:

* '06 UNTI - Dry Creek Valley Zinfandel
* '06 UNTI - Sonoma County Petit Frere
* '06 UNTI - Syrah

Time for lunch! We headed to meet with the women at Willi's Seafood Bar in Healdsburg. I enjoyed their Cucumber martini, and we passed around a half-dozen or s
o lunch entrees, including fried calamari, duck, baby back ribs, and crabcakes.

A stop a Big John's grocery, adn we got stocked up for dinner. We headed back to the house for a little relaxation and a few drinks. Then we fired up some music, and started prepping dinner. I made a spinach and feta salad with homemade vinaigrette made from Vincent Arroyo's Cabernet Balsamic Vinegar, and B.R. Cohn's olive oil. The main course was an old favorite, lamb chops with walnut mint pesto, and baked rosemary and garlic redskin potatoes. We had the UNTI that Richard picked up earlier in the day, and dinner at home became the highlight meal of the trip.

Thursday, October 15, 2009

Sonoma Trip Breakdown - Day 1

We hit B. R. Cohn for a tasting. My first visit to this very cool vineyard. Apparently B.R. Cohn was the road crew manager for the Doobie Brothers forever, so lots of fun memorabilia on the walls. They have a very friendly tasting room, and Phil showed us some great wines.

Since I've committed to making this the el-cheapo wine tour, I'm trying to make sure that all my wines come in (mostly) under $25 a bottle, and I'm bringing back only a case. I picked up two bottles at B. R. Cohn:

* B. R. Cohn - Boater's Barbera, 06

* B. R. Cohn - Syrcab, 07
(77% Syrah, 23% Cabernet Sauvignon)

I also picked up a balsamic vinegar and a jar of the kalamata tapenade.

After that, we hit the CIA for lunch in Napa. We sat right next to the Demo Kitchen and watched them prep everyone's food.

Lunch was a terrific hangar steak, amongst various other samplings. We made a quick visit to the gift shop, but resisted coming home with any new cooking implements.
After lunch, we headed back to base camp for a much needed nap, and got prepped for dinner at Zazu.

When I arrived, I declared to our hosts that there was only 3 mandatory activities for this trip 1) a stop at Teldeschi to pick up some Zin, 2) that I could make everyone dinner one night, and 3) that we would hit Zazu. Zazu is a small restaurant and farm in Sonoma that's been featured in countless wine magazines. The owner and chef, Duskie Estes, was on the Food Network Challenge a while back. My last trip to California, we had dinner here, and it was fantastic. One of my fellow travellers declared that it was the "best duck I've ever had", and the kale that was the side to my dinner is the reason that I grow kale in the garden at home. Dinner this time was no less exceptional. We dug into the black pig salumi plate and a bottle of Seghesio Zin.

Tuesday, October 13, 2009

A Brief Sojourn...

October has been a very busy month. Tomorrow I head off to wine country in northern California to visit with some old friends. I promise to post some good pictures and tell some stories when I get back.

It's a much needed break from a very hectic year, and the first real vacation I've had since 2007. I should arrive back home refreshed and ready to tackle the rest of the year.

First up on the agenda upon my return is TEDx Detroit. I'm very excited to be going, and I can't imagine being in a more perfect open mindset for the event than fresh off of vacation, especially considering some of the company I'll be keeping out in California.

I'll be sure and share what insights I gather from TEDx Detroit with all of you here. Be warned that, should there be any posting at all through the weekend, it is likely to wander off the reservation. Work and school have both imposed strict discipline of schedule and focus lately, so for the next 5 days, I'm taking my brain off the leash and seeing where it ends up.

Sunday, September 27, 2009

Peabody, Jarvis, and the New Sacred Cows

Bo Peabody has a nice piece in the WaPo about the business models of Social Networks.

He's a bit more dour about their monetization schemes than I would venture, but generally is in the ballpark.
A visit from the pope may attract a large audience, but it's not a great place to make money. Likewise, social networks can successfully bring people together, but don't expect them to turn a profit
Peabody cites examples of the failure of both advertising models on social networks, and the inability of social networks to get subscribers to pay for their services. Peabody cites the experience of Tripod (a once moderately sized social network which Peabody created), and reveals that the ad revenue generated on the site was never a fraction of a percent of that which Google hauls in with targeted search ads.

This is not necessarily a failure of a social networking ad model, but a failure of the size and intelligence of the social network. I imagine that Facebook's targeted ads, based on the intelligence and the size of the network, can one day generate a decent amount of ad revenue. But neither Facebook nor Google, nor whatever comes next will generate ad revenue akin to what we were used to from the bloated an inefficient media channels of the 20th century. As long as distribution channels are relying on that outdated benchmark, they're going to be disappointed by the amount of revenue their ads generate. From my post on the idea of "Innovative Deflation":
We're told to believe in our future in a knowledge based economy, but nobody has really figured out how to make real money of it. Of those who are making money off of it (Craigslist, Google), they are making pennies per dollar in the old markets that they've upset or practically eliminated with their innovation. This isn't because we haven't found the right monetization scheme yet. It is because innovation is leading to efficiency and not growth and that is exerting deflationary pressure on bloated industries.
As far as getting paid subscribers to generate revenue for a social networking site, even the slightest barrier to entry can hinder the growth of any given social network, and this is a kiss of death in a highly competitive market. Price always trends towards the marginal cost, and for social network sites, the marginal cost is practically less than zero! The value of the system increases with each additional subscriber.

Now Peabody warns:
We need to learn from the first dot-com bust, when services that benefited society disappeared just because they didn't make money. Imagine a world without social networks, in which I could not use Facebook to share hundreds of pictures of my infant son with his grandparents and the citizens of Iran could not use Twitter to challenge their political system. If we focus simply on a profit-and-loss equation, there is a real chance we will eventually lose these invaluable services.
This is alarmist to the extreme. Venture capitalists *do* need to learn from the first dot-com bust that many things on the Internet provide value without providing profit. It's the nature of non-rival goods ("bits-not-atoms", Jeff Jarvis would say). If Facebook collapses under the weight of its own walled garden (*cough* *cough*... MySpace), something will pop up to replace it. It may be a knockoff site, it may be an open source platform, it may be nothing more than a set of APIs and open protocols, but the genie isn't getting stuffed back into the bottle any time soon. If social networking has taught us anything it's that people are motivated to create and share for reasons far beyond profit, and in a world of information abundance (as opposed to the material scarcity of the real world), they will do it for no charge.

This brings to mind Jeff Jarvis' recent SideWiki jihad. Jarvis thinks that Google SideWiki has centralized power, not distributed it. The fact is, SideWiki has moved power away from his site and out to the readers (who can use SideWiki to comment on his site, as well as grant or remove authority of SideWiki posts by voting them up or down--the classic crowdsourced form of editorializing known as a "reputation system"). He's on the receiving end of the same treatment he's been advocating against old media, and doesn't much like the perceived loss of control he had previously exercised over his site.

It feels like we're retracing our steps. The Internet has consistently produced results along the following lines:

1) It preys on the inefficiency of old media
2) It moves control, power, and authority to the end user/edge of the network
3) It promotes/enables collaboration at nearly no cost
4) It removes scarcity from the Supply-and-Demand equation where bits-not-atoms are concerned.
5) It allows the crowd to control your brand

That certain Internet tools are subject to the same combat in which they dispatched their 20th century counterparts shouldn't surprise them. It amazes me how quickly some people can free themselves of one outmoded mindset, adopt some new gewgaw as revolutionary, and then immediately fall back into protectionist mode of their *new* sacred cow. Both Peabody and Jarvis, even armed with powerful observations and keen insight into new media, seem to be flirting with this temptation.

Wednesday, September 23, 2009

Cautious Optimism about Google Sidewiki

I can see the potential benefits of using SideWiki. As Clay Shirky said, "Every webpage is a latent community".

As far as robbing bloggers of their comment space, Google Notes can do that. Facebook does that. FriendFeed does it, etc. It's not new, and I'm not sure that it's evil. Moving power to the edge isn't just about moving it to the authorspace, be it the New York Times, or BuzzMachine. In my case, it's about moving the power to me as a commenter. And I'm just as much on the edge as the Author.

If nobody whips up a integrated comment system for WordPress and Blogger that uses SideWiki as the engine, I'll be surprised.

A quick search through the API looks like there's no way to use the API to insert comments yet, which could be a roadblock. And the fact that comments are voted up instead of threaded pretty much kills it as a discussion space.

However, I'm cautiously excited about what this may evolve into.

in reference to: Google Sidewiki: Danger « BuzzMachine (view on Google Sidewiki)

Tuesday, September 22, 2009

Genachowski's Net Neutrality Policy

I was excited to get home and listen to Julian Genachowski's speech on the FCC's stance on Net Neutrality yesterday. If you haven't read it yet, you can find it here.

I was, and remain, cautiously optimistic about Genachowski's appointment, and President Obama's professed support of Net Neutrality. But as always, the Devil is in the details. Sadly, Genachowski's speech did little to share those details with us.

This seems to be Julian Sanchez's observation as well, though he's far more skeptical than I:
The digest version is that the open Internet is awesome (true!) and so the FCC is going to impose a “nondiscrimination” obligation on telecom providers—though Genachowski makes sure to stress this won’t be an obstacle to letting the copyright cops sniff through your packets for potentially “unauthorized” music, or otherwise interfere with “reasonable” network management practices.

If the FCC's stance amounts to protecting end-to-end best effort delivery of packets, then I can wholeheartedly support it. This is part of the underlying structure of how the Internet and TCP/IP was designed, and to quote Larry Lessig, "Code is Law". This is a more thorough description of the End-to-End principle I laid out on this blog some time ago:
When you request a webpage (be it from Google, or from my tiny website), the packets being delivered to your desktop are switched along all the intermediate pathways (by AT&T, Comcast, or whomever) *without being molested*. Every packet on the network, from end to end, queues up and shoots down the line at it's fastest possible speed. Comcast wants the right to hold up your packets in transit to make way for traffic they deem more important. This is a violation of Net Neutrality. When intermediate carriers and providers can decide what types of applications, or packets from certain sources, are given priority at the switch level, they can decide which sites perform better on your desktop. Not based on the bandwidth that you pay for...Not based on the bandwidth the website pays for... But on which content is in the *best interest of the ISP*.

I can understand the FCC's role in protecting against this, and we've already seen ISP's violate this principle in the name of "network management practices". This is a smokescreen. If an ISP can not deliver as advertised the connection speeds which it is selling, regardless of the nature or volume of the traffic generated by its own customers, then it is falsely advertising as service that it doesn't have the ability to sell. It's that simple.

Hopefully, this is the kind of violation that the FCC will focus on, but Genachowski's speech is vague enough that it doesn't fill me with much enthusiasm.

One part of the speech holds profound implications for cellphone service providers and the mobile internet:
New mobile and satellite broadband networks are getting faster every day, and extraordinary devices like smartphones and wireless data cards are making it easier to stay connected while on the go. And I note the beginnings of a trend towards openness among several participants in the mobile marketplace.

Even though each form of Internet access has unique technical characteristics, they are all are different roads to the same place. It is essential that the Internet itself remain open, however users reach it. The principles I’ve been speaking about apply to the Internet however accessed, and I will ask my fellow Commissioners to join me in confirming this.

This statement, combined with the FCC's recent probe into who rejected the Google Voice app on the iPhone, concerns me. It seems to state clearly that AT&T wouldn't be able to filter out Google Voice data from the network, but does it mean that Apple can't choose which apps run on the iPhone, something technically completely outside of network management practices? Time will tell, but if I was an iPhone lover (I'm not) I'd be worried that the FCC is messing with the curated experience that I have chosen Apple to provide for me.

Understandably, AT&T is less than thrilled with this, particularly after they dropped so much cash on an FCC auction for a portion of the airwaves specifically set aside to be run as AT&T sees fit (unlike the portion that Verizon bought, much credit due to Google, that demands end-to-end openness). More details on that story here.

One thing is certain, the FCC is making waves right now. I don't envy the service providers who must work with them, as building business plans on shifting sand is always a difficult thing. Hopefully, the FCC will develop concrete guidelines that can inform all the actors soon. The FCC's heart is is in the right place, and Genachowski is certainly smart enough about the technology not to make any boneheaded moves, but as always, it's the unintended consequences to be wary of.

Thursday, August 13, 2009

Social Media Links - Video Edition

Hey folks, I've been gathering a few videos up lately, and put them together in a little playlist over on Youtube. They encapsulate some of the big-picture ideas around social media. They are the starting point for a body of evidence that the social nature of the Internet is a bigger game-changer than the printing press in human history.

Enjoy, won't you?

Saturday, August 1, 2009

FCC: None of Your Damn Business

Erick Schonfeld writes a nice piece detailing the FCC's request to Apple, Google, and AT&T to clarify why the Google Voice application was rejected from the iPhone App Store. (h/t @ajkeen)

While I share Shonfeld's views on the importance of open pipes, I can't share his cheerleading of the FCC's inquiry: "The iPhone needs to be smashed open, and the FCC is swinging the hammer."

I think this is conceding victory to the iPhone in the handheld market way too early in the game. It is not some universal platform for access that we are all beholden to. The iPhone is what every product from Apple is: sleek, sexy, well designed, and easy to use. This extends well past the device itself and to the platforms and applications that support it, including the App Store. It is *not* open. To be open would go against the very fabric of what Apple is. Apple is more than a product or a platform; it's a lifestyle choice. Apple's market has always been to those people who don't want to peek under the hood. They want their experience to be easy, sanitized, sleek, and functional. They want whatever experience Steve Jobs wants them to have. He is their guru; their sherpa guide; their tour director for all things Tech. This is why Apple's stock takes a hit when Jobs gets ill. Without his vision, Apple doesn't have one. To quote the tweet from Andrew Keen, "Apple ecosystem good because its closed." That's true, to an extent. It's true for those who've elected to have their experience guided and moderated, and we have to leave room for that market.

So while I'm committed to an open and free Internet, I think this can be best addressed, not by the FCC dictating to Apple what it should and should not offer on their platform, but by letting Apple fill the niche it has filled since the Apple IIe: the easy-to-use moderated experience for the layman. There are plenty of competitors out there who will offer platforms of varying degrees of openness to their markets. With that openness comes complexity. Not everybody wants that, and I can understand. Those of us who want open access will seek it out. The market has room for all of our tastes, and if the FCC is willing to exert pressure on Apple to "open up", then they are just as likely to exert it on others to standardize towards some homogeneous handheld internet experience.

Wednesday, July 29, 2009

Anthony Bourdain on Detroit...

Tony Bourdain on Detroit:

Detroit. Where just about everything cool originated. As angry as one gets looking at block after block of abandoned row houses in Baltimore and wondering how the hell that happened, it's mind boggling to see how far Detroit has been allowed to fall. But what a truly magnificent breed of crazy-ass hardcase characters have dug in there. Of all three cities we visited, Detroit, oddly enough, even while looking the jaws of death straight in the face, remains closest to being a true culinary wonderland. This is due entirely to the successive waves of migration and immigration from all over the world, when people came to MAKE things in America -- each group bringing their own food and traditions. Detroit IS the story of America, for better -- and worse, and I think we've missed that, allowed ourselves to look away. Detroit, after all, made us who we are. Literally. A country of cars, highways, car culture, upward mobility, rock and roll, rhythm and blues, and what were once, unlimited dreams. Whatever happens next, Motown, Eminem and the Stooges' "Fun House", at least, shall surely outlast the automobile.


I love this town.

Here's a missing scene from the Rust Belt episode.

Thursday, July 23, 2009

The Knowledge Economy That Isn't

The online revolution really is just that: A Revolution.

For 15 years now, we've heard the phrase "The Internet Revolution" so often that it's a cliche, but most times, the authors throwing about the phrase didn't realize how right they were.

They never saw this coming, and many still don't. The hype about social media today sounds just like the hype about "multimedia" of 15 years ago. Is multimedia huge? Absolutely! So much so that it's practically ubiquitous today, and we don't even need to reference it as it's own entity anymore. Social media (and the Internet as a whole) will travel this same path. But what did we learn from multimedia and the dot-com bubble of the late 90's?

The Internet has greatly increased the power of the consumer, it has greatly benefited the consumer, and it has destroyed many traditional businesses in the process. I've been obsessed with this "Innovation Deflation" for weeks now, since Jeff Jarvis wrote this piece, and all the gears fell into place.

All the flap these days about how much Twitter or Facebook is worth is probably going to look pretty silly a decade from now. The answer will likely be "not much" in terms of dollars, even if it's profoundly valuable to it's users, much like the Internet itself.

So what are the signs of Innovation Deflation? They're pretty easy to spot. Look for industries that are suffering from contraction, losing revenue, cutting jobs, all while the end user or consumer is being better served. Craigslist and iTunes are the classic examples. They may be making a pretty penny, but they are supplanting entire industries that were worth tens (if not hundreds!) of times what these companies are worth.

Here are some more signals I've seen in just the last few weeks:

Marketing: Josh Bernoff at Ad Age writes:
Spending on digital marketing will double in the next 5 years, but ad budgets won’t. [...] Six out of ten marketers we surveyed agreed with the statement "we will increase budget for interactive by shifting money away from traditional marketing." Only 7% said "we have no plans to increase our marketing budget."

Unlike the last recession, digital marketing is no longer experimental. Now it looks more like advertising is inefficient, relative to digital.
(H/T Joe Trippi)

Music: Brad Stone writes an article in the New York Times titled, "Artists Find Backers as Labels Wane":
The major labels — Sony Music, Warner Music, EMI and Universal Music — no longer have such a firm grip on creating and selling professional music and minting hits with prime placement on the radio.

Much of that has to do with the rise of the Internet as a means of promoting and distributing music. Physical album sales fell 20 percent, to 362.6 million last year, according to Nielsen, while sales of individual digital tracks rose 27 percent, to 1.07 billion, failing to compensate for the drop.
Markets: James Altucher write for the Wall Street Journal, The Internet Is Dead (As An Investment):
Let's face it. Electricity greatly improved our quality of life. But I'm not going to get excited about buying a basket of utility companies. Same for the Internet. Can't live without it, but can't live with it (in my portfolio).
More importantly?
Don't just ask me. Ask the best. Nobody can figure out a business model.
It may simply be that there isn't a business model to be found. Have you run across any more examples of these efficiencies that benefit the consumer by deflating bloated and inefficient old markets? Share them in the comments!

Wednesday, July 22, 2009

More Mass Market Deflation

Courtesy of Brad Stone at the New York Times:
Polyphonic and similar new ventures are symptomatic of deep shifts in the music business. The major labels — Sony Music, Warner Music, EMI and Universal Music — no longer have such a firm grip on creating and selling professional music and minting hits with prime placement on the radio.

Much of that has to do with the rise of the Internet as a means of promoting and distributing music. Physical album sales fell 20 percent, to 362.6 million last year, according to Nielsen, while sales of individual digital tracks rose 27 percent, to 1.07 billion, failing to compensate for the drop. Mindful of these changes, in the last few years marquee musicians like Trent Reznor, the Beastie Boys and Barenaked Ladies have created their own artist-run labels and reaped significant rewards by keeping a larger share of their revenue.

Sound familiar? In an earlier post, I wrote:
Every business model relying on intellectual property law (patent and copyright) is heading for massive deflation in our lifetimes. We've seen it with the music industry and newspapers already. The software industry is starting to feel it with the maturity of open source software, and the migration of applications to the cloud. Television, movies, and books are next. I've come to question the ability of copyright and patent law to foster innovation, but leaving that aside, the willingness of people to collaborate and share, and the tools provided for it on the internet, may render these laws obsolete.

Friday, July 10, 2009

The NYT Book Review on Chris Anderson's Free: The Future of a Radical Price

One of my favorites, Virginia Postrel, offers a solid review of Chris Anderson's new book, Free: The Future of a Radical Price in the New York Times.

She just nails it:

Opponents of the free-content argument too often reject the idea that free content is the future simply because they don’t want it to be true.[...]

“No man but a blockhead ever wrote except for money,” Samuel Johnson said, and that attitude has had a good two-­century run. But the Web is full of blockheads, whether they’re rate-busting amateurs or professionals trawling for speaking gigs. All this free stuff raises the real standard of living, by making it ever easier for people to find entertainment, information and communication that pleases them.

Business strategy, however, seeks not only to create but to capture value. Free is about a phenomenon in which almost all the new value goes to consumers, not producers. It is false to assume that no price means no value. But it is equally false to argue that value implies profitability.

Enjoy the whole article, it's more than just a review. It offers Postrel's usual keen insight, helping us to read between the lines.

Tuesday, July 7, 2009

The Highlight Reel

Mike Masnick, CEO and Founder of Techdirt, flatters me far more than I deserve, citing my recent post, Intellectual Property and Deflation of the Knowledge Economy:
The Citizen Media Law Group points us to an even better explanation of this very point, by Eric Reasons, noting that artificial scarcity is facing massive deflation. It's such a great concise way of making the point, I wish I'd thought of it:
Every business model relying on intellectual property law (patent and copyright) is heading for massive deflation in our lifetimes. We've seen it with the music industry and newspapers already. The software industry is starting to feel it with the maturity of open source software, and the migration of applications to the cloud. Television, movies, and books are next. I've come to question the ability of copyright and patent law to foster innovation, but leaving that aside, the willingness of people to collaborate and share, and the tools provided for it on the internet, may render these laws obsolete.

He then explains why he believes deflation is the right term:
Why is deflation a better descriptor? Because as businesses whose product is reliant on intellectual property shrink due to Internet-based efficiencies, consumers are reaping the rewards of these efficiencies.
Exactly. The reason old business models are at risk is because the free distribution of content is simply more efficient due to modern technology, and it's about as close to impossible to hold back economic efficiency, once enabled. Artificial scarcity is based on pretending you can hold back that efficiency.

Masnick then goes on to point out that I'm being a tad negative, in which he's absolutely right. Of course, that post was largely a reaction to all of the cheerleaders I have heard touting a "knowledge economy" as our sanctuary. I merely wanted to issue some caution not to take that point for granted.

There's some great discussion going on over there in the comments section. Dive in!


Joe Trippi generously linked my post (The Economic Reset Button) in his Eric Schmidt on Innovation.

I'm pretty sure it was to grab the video of Jeff Jarvis and Eric Schmidt, but still... If Howard Dean's 2004 National Campaign Manager, and author of The Revolution Will Not Be Televised wants to link you, you're gonna take it any way you can get it, and you're gonna damn well link him back.


Finally, a smattering of tweets for The Economic Reset Button:




Most notably, @williamfischer dragged @jeffjarvis over for some comments on the post. Color me flattered!


If I get linked by either Clay Shirky or Larry Lessig this week, I'm throwing a party.

Sunday, July 5, 2009

Innovative Deflation

In recent posts, I have:

...Questioned whether Intellectual Property Law spurs innovation or hinders it.

...Suggested that one need not change IP law to have it lose in the long run to the culture of free (or the "culture of participation", if you prefer Craig Newmark's lingo).

...Claimed that we shouldn't abandon traditional economies in favor of a "knowledge economy" that may not be the panacea that some claim it to be. This comes largely out of Jeff Jarvis' recent thoughts on innovation yielding efficiency more than it yields growth. I argue that this efficiency doesn't just shrink some markets in isolation, but can lead to deflation of the economy as a whole. Innovative deflation.

I wanted to dig into this last point a bit more and get a discussion going on how to substantiate or dismiss such a claim: "Is the knowledge economy ripe for growth, or is it the means by which traditional economies are shrunk?"

My argument is two-fold. First, that the Internet is an all-encompassing agent of change for the global economy, allowing efficiencies that bring down prices and increase services, but also cost jobs and lower wages, without replacing them elsewhere. Second, that it does not replace the lost jobs and wages with new equivalents, because so much of the displacement is owed to the burgeoning "culture of free", and that this trend will likely increase over time, not decrease.

The Deflationary Pressure of Internet Efficiencies

Maybe the reason we're having such a hard time finding out ways to monetize various internet services like Twitter, Facebook, and Youtube, is that they can't be monetized, (See Mark Cuban's "When You Succed With Free, You Are Going To Die By Free") or at least not at replacement rates to the industries and services that they're supplanting. This is exactly what they print media is finding out the hard way as it tries to shift to an online model.

The fact that the Internet allowed efficiencies that pressure traditional industries to shrink (as Jeff Jarvis puts it) is fairly self-evident. These examples either have happened already, or are being ushered in in the very near future:
  • Online music sharing prompts the RIAA into agreements with iTunes and Rhapsody, etc.
  • Social Networking reduces the need and efficacy of radio play for promotion of music.
  • Craigslist undercuts the print media's business model based around classified ads.
  • Online news reduces the relevance of the print media's daily news cycle, and eliminates the need for the production and delivery of news on paper.
  • Social Networking gives access to news events as they happen, further reducing the relevance of the daily news cycle, and the need for editorial story selection, as we editorialize for each other directly.
  • Retail locations reduce in scope and relevance due to online shopping.
  • Efficiencies in targeted online marketing greatly reduce traditional marketing's influence (whose monetization model was built around grossly inefficient metrics, such as magazine circulation, instead of click-through.)
  • Social Networking further reduces the efficacy of traditional advertising as we announce and review goods and services for each other.
Each of these is likely to (or already has) cost jobs and are not likely to replace them. Too many of these jobs relied on the traditional inefficiencies of their business models--inefficiencies that have been *eliminated*, not just shifted to new markets. The closer the markets are to intellectual property, the faster they fall.

Lastly, all of these displaced professionals are going to go seeking work in still-viable markets, if they can attempt the transition at all. The labor supply will increase as both knowledge markets and traditional markets restructure to take advantage of new efficiencies, and that restructuring will include taking advantage of the aforementioned increase in labor supply. Hours will be cut. Wages will fall. So too will the cost of living fall as these efficiencies are passed on the consumer. The balance between these two forces will be the key to determining how painful the transition is.

The Increasing Supply from the Culture of Free

The last time there was a major shift in the economic base was the transition to mass markets/mass production/mass media in the 20th century. It gave us lots of things that society didn't really have before, but most importantly--and I'm not joking here--it gave us weekends.

I could lay out a long argument here, but I could not do it the justice that Clay Shirky did at the Web 2.0 conference in 2008. You should immediately jump over and read the whole transcript, but here's the key passage:
If I had to pick the critical technology for the 20th century, the bit of social lubricant without which the wheels would've come off the whole enterprise, I'd say it was the sitcom. Starting with the Second World War a whole series of things happened--rising GDP per capita, rising educational attainment, rising life expectancy and, critically, a rising number of people who were working five-day work weeks. For the first time, society forced onto an enormous number of its citizens the requirement to manage something they had never had to manage before--free time.

And what did we do with that free time? Well, mostly we spent it watching TV.

We did that for decades. We watched I Love Lucy. We watched Gilligan's Island. We watch Malcolm in the Middle. We watch Desperate Housewives. Desperate Housewives essentially functioned as a kind of cognitive heat sink, dissipating thinking that might otherwise have built up and caused society to overheat.

And it's only now, as we're waking up from that collective bender, that we're starting to see the cognitive surplus as an asset rather than as a crisis. We're seeing things being designed to take advantage of that surplus, to deploy it in ways more engaging than just having a TV in everybody's basement.
Shirky lays out a whole series of examples and data that backs up his assertion that, as a culture, we are heading permanently towards more participation, and that this participation is based on our ability and desire to harness our free time not just for consumption, but for creation, and sharing.

Much of the efficiency of the Internet is based solely on the nature of the medium, but the real game changer isn't HTTP, or increasing bandwidth into our homes--no traditional industries would suffer from that if we didn't fundamentally change the way we interact with each other with the Internet, which is exactly what the culture of participation is.

Would the RIAA have opted to sell you a song for $1, even though the technology existed to do so if they weren't competing with free peer-to-peer music sharing?

Would the worlds most popular web server (Apache), or the OS it runs on (Linux) ever get written if individuals didn't collaborate with the ease that the Internet allowed them to?

These efficiencies that are causing traditional markets to shrink are largely created by our culture of participation.

Putting it All Together

The culture of participation is forcing efficiencies that can have deflationary effects on our economy. This allows us to purchase more with less, but also gives us less to purchase with, if it is forcing upon us lower wages and fewer work hours. What it may give us is *more free time* (whether we want it to or not). So if that free time is part of what allows this culture of participation to help create these efficiencies, and the efficiencies create more free time... Then you have not just deflation, but a deflationary spiral that doesn't end until the traditional economies (based on real scarcity) have absorbed the new efficiencies.

Jeff Jarvis, at the Aspen Ideas Festival, asked Eric Schmidt, CEO of Google, "Is what we're going through right now more than a recession or a financial crisis, or is it a fundamental restructuring of the economy and society, going past the industrial age of mass production/media/marketing into something based on knowledge and abundance?". Kai Rysdall followed up with his own question to Schmidt: "Do you not then believe that this economy has, over the last two years, been fundamentally reset?". Schmidt's answer was:
Where's the data? Almost all the money, and all the people, and all of the capital, is *not* going to where you described [a knowledge economy]. It's going into traditional businesses and traditional industrial and service operations.
Where did the money go? To traditional enterprises based on "atoms, not bits" (to borrow one of Jeff Jarvis' excellent terms). Surely part of this is due to the heavy government involvement trying to preserve failing traditional industries in the face of innovative deflation, but a lot if it is returning private investment in the economy, trying to make their own smart decisions. The market isn't going to buy into a bubble with no solid monetization scheme, especially after the lessons learned from the dot-com bubble of 2000.

So if the knowledge economy isn't much of an economy, what economy will be left standing? While these traditional industries are likely to be greatly impacted by the kinds of efficiencies that Jarvis cited, they can't escape the laws of supply and demand because they're still based on real and scarce resources (unlike intellectual property, where supply is constricted largely due to laws and not actual scarcity) . That these are the very same industries that Schmidt cited as the beneficiaries of much of our recovering economy is no coincidence.

We're told to believe in our future in a knowledge based economy, but nobody has really figured out how to make real money of it. Of those who are making money off of it (Craigslist, Google), they are making pennies per dollar in the old markets that they've upset or practically eliminated with their innovation. This isn't because we haven't found the right monetization scheme yet. It is because innovation is leading to efficiency and not growth and that is exerting deflationary pressure on bloated industries. Moreover, it is largely being done by us, the end-user, in our free time, because we want to create and share, not just consume.

Thursday, July 2, 2009

The Economic Reset Button

[Update: This accidentally became a series of posts on a theme.

Does Intellectual Property Law Foster Innovation? Where I question the efficacy of patent and copyright in a socially networked world.

Intellectual Property and the Deflation of the Knowledge Economy - Where I toy with the idea that the Knowledge Economy may not turn out to be much of an economy, especially when it comes to Intellectual Property

The Economic Reset Button - (this post) Where Jeff Jarvis asks Eric Schmidt whether or not this is a fundamental shift in the economic base

Innovative Deflation - Where I ask, "Is the knowledge economy ripe for growth, or is it the means by which traditional economies are shrunk?" ]

Below is an exchange between Jeff Jarvis and Eric Schmidt at the Aspen Ideas Festival. This is a very important 5 minutes to watch. Is our economy fundamentally shifting away from mass production/mass markets towards a knowledge economy?

Moreover, if my previous assertions are anywhere near correct, is this desirable from an economic standpoint for the U.S., given our current policies? I asked if there any real money to made in a "knowledge economy" in the long run:
Because as businesses whose product is reliant on intellectual property shrink due to Internet-based efficiencies, consumers are reaping the rewards of these efficiencies. Fewer people are employed by this sector, but fewer consumers are having to pay for products previously only produced by this sector.

To quote Jeff Jarvis from a different post:
Craigslist is blamed for destroying (that’s from the publishers’ perspective) $100 billion in classified ad value, replacing it with its reported $100 million revenue.

If we outsource mass production--the parts of our economy that are actually governed by the laws of supply and demand (scarcity)--and shift it towards a knowledge economy headed for deflation (abundance), what's left?

Don't get me wrong, I'm not at all proposing trade barriers, tariffs, or other forms of ineffective protectionism. I have no illusions that the bubble of a manual labor middle class has long burst in the U.S. However, we shouldn't be clinging to it until it sinks the whole ship. Isn't there some way to decouple the costs of production labor from the product? Robotics and automation? Lower wages? Less attractive benefits? I'd rather have GM making competitive cars in America and paying out lower wages to fewer people, than having no GM at all when we realize that the knowledge economy is really becoming a knowledge commune.

Is production an all-or-nothing game in America? It seems the only option we're given is to pay for it at traditional levels and wait until U.S. production collapses in on itself or exits the country, because we're unwilling to let wages and benefits fall to meet actual demand. In short, does GM exist to make affordable and desirable cars, or does it exist to employ people?

Given the amount of current consumption of intellectual property (copyrighted material like music, software, and newsprint; patented goods like just about everything else), couldn't we take advantage of this deflation to help cushion the blow of falling wages? How much of our income is dedicated to intellectual property, and its derived products? If wages decrease at the same time as cost-of-living decreases, are we really that bad off? Deflation moves in both directions, as it were.

That isn't to say that we're not in for a rough ride no matter what. As private citizens, we're reeling in our outstanding credit and tightening our belts, as we should be. One would hope that the government would learn from our good example. Instead, it's trying to reinflate a bubble that can't hold air: The housing market; General Motors; Chrysler; "Green Technology" as a fictional oasis for labor; The whole damn finance industry that was only sustained by, and lived to sustain, our now corrected bad spending habits.

Every bit of economic policy coming out of Washington is based on trying to maintain a status quo that can not be maintained in a global marketplace. This can temporarily inflate some sectors of our economy, but ultimately will leave us with nothing but companies that make the wrong things, and people who perform the wrong jobs. You know what they say: "As GM goes, so goes the country."

Retraining for a knowledge economy is fine in the short run, but it is no panacea. Craigslist doesn't employ the number of people it displaced in the newspaper business, and we can use this as a model for many of the effects of a knowledge economy. We should let supply and demand govern costs where it can, in the land of atoms, and preserve production at some level in this country, even if it's not the level we're comfortable with. These falling wages will provide incentive (for those who are able) to move slowly into more productive areas of our economy over time, to cushion their transition with the decreasing costs of living brought on by the information age, and not find themselves jarringly displaced at the collapsing of the next bursting economic bubble.

Sunday, June 21, 2009

Intellectual Property and Deflation of the Knowledge Economy

[Update: This accidentally became a series of posts on a theme.

Does Intellectual Property Law Foster Innovation? Where I question the efficacy of patent and copyright in a socially networked world.

Intellectual Property and the Deflation of the Knowledge Economy - (this post) Where I toy with the idea that the Knowledge Economy may not turn out to be much of an economy, especially when it comes to Intellectual Property

The Economic Reset Button - Where Jeff Jarvis asks Eric Schmidt whether or not this is a fundamental shift in the economic base

Innovative Deflation - Where I ask, "Is the knowledge economy ripe for growth, or is it the means by which traditional economies are shrunk?" ]

Friday night I was discussing the future of intellectual property law with some friends. My argument, in a nutshell:

Every business model relying on intellectual property law (patent and copyright) is heading for massive deflation in our lifetimes. We've seen it with the music industry and newspapers already. The software industry is starting to feel it with the maturity of open source software, and the migration of applications to the cloud. Television, movies, and books are next. I've come to question the ability of copyright and patent law to foster innovation, but leaving that aside, the willingness of people to collaborate and share, and the tools provided for it on the internet, may render these laws obsolete.

Jeff Jarvis seems to be toying with some of the same ideas when he posted When Innovation Yields Efficiency last week. In it, he writes:

But as I thought through the major innovations of the last decade, many of them have not led to economic growth; they haven’t added money to the economy but left it in the economy. Thus measuring innovation’s impact in the revenue, growth, productivity, and market cap of large companies may not be valid. Instead, we are seeing innovation take money out of their pockets, leaving it with their customers.

The problem, if you can call it that, is that many of the customers are also employees that have had their jobs fall victim to efficiency. Jarvis refers to this as "efficiency" or "shrinkage", and he's right on both counts. But the better term for it is "deflation". Journalists, auto workers, record industry players, retail sales clerks, and marketing staff are forced to go looking for work in shrinking markets. These businesses are either suffering from old business models based on increasingly artificial scarcity (newspapers, music, marketing, software development), or are able to do more work with the fewer resources due to the newly created efficiency (retailers). In short, businesses relying on artificial scarcity created by intellectual property law, are businesses most susceptible to deflation.

Why is deflation a better descriptor? Because as businesses whose product is reliant on intellectual property shrink due to Internet-based efficiencies, consumers are reaping the rewards of these efficiencies. Fewer people are employed by this sector, but fewer consumers are having to pay for products previously only produced by this sector.

The knowledge based economy doesn't follow the laws of supply and demand. (Well, sort of.) First, Intellectual property are largely non-rival goods, meaning that I can "consume" news, or music, or software, and it doesn't get used up. Until recently, restrictions on production in the delivery medium (newsprint and CD's) and/or licensing restrictions on consumption have kept the law of supply and demand in place for intellectual property.

The Internet first struck a blow to the restriction on production, because the copying and transmission of IP became nearly free. Now, with the maturation of open source software, social networks, and collaborative platforms, we're moving away from licensing restrictions on consumption: social networks and news aggregators bring us news, blogs bring us opinion pieces, musicians like Nine Inch Nails and Jonathan Coulton are beginning to release their music for free. Musicians don't need the backing of recording studios any longer: They'r recording in home studios, fans spread their music via social media, and fewer people are getting new music from the radio.

Effectively, the restrictions that held supply in check for IP are slowly falling away. As effective supply rises, price plummets. Don't believe me? You probably spend less money now on music than you did 15 years ago, and your collection is larger and more varied than ever. You probably spend less time watching TV news, and less money on newspapers than you did 10 years ago, and are better informed.
I won't go so far as to say that the knowledge economy is going to be no economy at all, but it is a shrinking one in terms of money, both in terms of cost to the consumer, and in terms of the jobs produced in it.

Kevin Kelly of Wired magazine called this "The New Socialism". He's aware of the stigma attached to the word, but he justifies well:

When masses of people who own the means of production work toward a common goal and share their products in common, when they contribute labor without wages and enjoy the fruits free of charge, it's not unreasonable to call that socialism.

He's right. I've always been a capitalist to the core. I have frequently defended this belief by saying that Capitalism is society's best method for the allocation of scarce resources. And I believe that now more than ever. But what happens to markets like intellectual property when "scarcity" no longer exists?

Tuesday, June 16, 2009

Cyberdefense and Civil Liberties

Jim Harper over at Cato is still keeping an eye on the Fed's grab for cybersecurity authority.
That’s correct. “Cyber” is not a problem that affects our sovereignty or the integrity of our national boundaries. Thus, it’s not a problem for the defense or intelligence establishments to handle.

The benefits of the online world vastly outstrip the risks - sorry Senator Rockefeller. With those benefits come a variety of problems akin to graffiti, house fires, street closures, petit theft, and organized crime. Those are not best handled by centralized bureaucracies, but by the decentralized systems we use to secure the real world: property rights, contract and tort liability, private enterprise, and innovation.

I've blogged about this before, here and here, but it's worth keeping tabs on.

Sunday, June 14, 2009

Does Intellectual Property Law Foster Innovation?

[Update: This accidentally became a series of posts on a theme.

Does Intellectual Property Law Foster Innovation? (this post)Where I question the efficacy of patent and copyright in a socially networked world.

Intellectual Property and the Deflation of the Knowledge Economy - Where I toy with the idea that the Knowledge Economy may not turn out to be much of an economy, especially when it comes to Intellectual Property

The Economic Reset Button - Where Jeff Jarvis asks Eric Schmidt whether or not this is a fundamental shift in the economic base

Innovative Deflation - Where I ask, "Is the knowledge economy ripe for growth, or is it the means by which traditional economies are shrunk?" ]

Patent and copyright were established in this country under the assumption that the limited-term monopoly rights for creators foster innovation. The promise of exclusive reward to a creator for some set period of time provides incentive to pursue the overhead costs of research, invention, and innovation. But can we take that mechanism as a given? Does IP law really spur innovation? It may not be as clear as we think in the socially networked age.

Thomas Jefferson once asked this very question in a letter to Isaac McPherson:
It would be curious then, if an idea, the fugitive fermentation of an individual brain, could, of natural right, be claimed in exclusive and stable property. If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property. Society may give an exclusive right to the profits arising from them, as an encouragement to men to pursue ideas which may produce utility, but this may or may not be done, according to the will and convenience of the society, without claim or complaint from anybody. Accordingly, it is a fact, as far as I am informed, that England was, until we copied her, the only country on earth which ever, by a general law, gave a legal right to the exclusive use of an idea. In some other countries it is sometimes done, in a great case, and by a special and personal act, but, generally speaking, other nations have thought that these monopolies produce more embarrassment than advantage to society; and it may be observed that the nations which refuse monopolies of invention, are as fruitful as England in new and useful devices.

In their book Against Intellectual Monopoly, Michele Boldrin and David K. Levine lay down a pretty thorough argument that the granting of patent to James Watt for an innovation he made with the Newcomen steam engine delayed further innovation (and the onset of the Industrial Revolution) by 20 years:

Once Watt’s patents were secured and production started, a substantial portion of his energy was devoted to fending off rival inventors. In 1782, Watt secured an additional patent, made “necessary in consequence of ... having been so unfairly
anticipated, by [Matthew] Wasborough in the crank motion.” More dramatically, in the 1790s, when the superior Hornblower engine was put into production, Boulton and Watt went after him with the full force of the legal system.

During the period of Watt’s patents the U.K. added about 750 horsepower of steam engines per year. In the thirty years following Watt’s patents, additional horsepower was added at a rate of more than 4,000 per year. Moreover, the fuel efficiency of steam engines changed little during the period of Watt’s patent;
while between 1810 and 1835 it is estimated to have increased by a factor of five.

After the expiration of Watt’s patents, not only was there an explosion in the production and efficiency of engines, but steam power came into its own as the driving force of the industrial revolution. Over a thirty year period steam engines were modified and improved as crucial innovations such as the steam train, the
steamboat and the steam jenny came into wide usage. The key innovation was the high-pressure steam engine – development of which had been blocked by Watt’s strategic use of his patent.

These things may call us to question the efficacy of intellectual property law, but the advent of the Internet may make this point moot regardless. Legally protected intellectual property are now having to compete with free, collaborative, openly created intellectual property. And it's damned hard to compete with free. Intellectual property is essentially being rendered a commodity.

New efficiencies arise that threaten these business models, but the efficiency is passed to the consumer. Instead of listening to radio to hear new artists, they are being recommended by our friends, and streamed to us on facebook, youtube, and from the artists own websites. Instead of buying whole CD's for the 2 or 3 songs we like, we now purchase music a la carte, for less than $1 a track. These are new efficiencies in the music business... efficiencies the RIAA would rather not have had to deal with. They enjoyed the economic bubble that supported their business model just the way it was, thank you very much. It is only in the face of music sharing on the Internet that they were forced to change, to the benefit of consumers. They could no longer command consumption at the levels capable of sustaining their economic bubble. Thus, there is massive deflation in the music industry in terms of money, yet all of our music collections are larger and more varied than they've ever been, and we've paid less for more.

This is the future for all businesses that rely on intellectual property. More variety, more innovation, greater availability, and less money involved.