Piracy and Illegal Downloads

[Bankai]

@jacob: it's not all or nothing, innovation would still be rewarded - if a new product enters the market, it does take a while for the competition to catch up and possibly overtake. The more complex the product, the longer it would probably take.

[jacob]

@Bankai - In scenario 2, Company A would not have bothered to make B in the first place but instead joined Companies C, D, E, & F in making X, Y & Z presuming X, Y & Z existed already. As a result, the consumer market would comprise cheaper X, Y & Z but no B.

If X, Y & Z did not exist, then consumers would have no product range at all as the above-mentioned companies would be in some other business.

In summary: Existing IP could be monetized this way and thus be made cheaper for everybody. That's the "pirate-everything"-argument. The "IP is important"-argument is that while consumers can benefit by monetizing the existing IP now and making it available to everybody, future innovation would decrease for lack of incentive because many would no longer be able to afford to divert resources to it. The strong form of that is that eventually there would be less innovation. The weak form of that is that eventually there would be different innovation---it would go into developing products that can not easily be replicated.

Add: Yes, I agree there would be some innovation due to the first-mover advantage. They would have to move fast though. This means no spending tons of resources to develop something that is easy to copy. For example, in the literary world this would point towards quick 5 page short stories to sell to those who just can't wait and who are willing to pay instead of waiting ... and discourage writing War & Peace length novels. That's essentially the "e-book" model in which one charges $40 for a double-spaced 20 page pdf file... and then just offers up a whole lot of e-books instead of distilling one's work down to a "real" book. Since the profits per book is much higher, it's economical to sell fewer books. => The price tag goes up and fewer people will pay it; but eventually the content will be pirated and made available to everybody for free. So that's another workable model.

As for producing stuff, the innovations would again be simple and put into small batch productions with the aim of coming up with a new model week after week. Basically, for this to work the innovation time < the batch copying time... since one only has a finite amount of time to capitalize. One of my youtube patreons uses exactly this model. He doesn't like patents either.

[Bankai]

future innovation would decrease for lack of incentive because many would no longer be able to afford to divert resources to it.

Perhaps some would no longer innovate, but how many more would start to innovate? Currently, there are companies which made tons of $ using a single patent; they can now afford to outright buy any small competition that invents something better. That better idea/thing often gets shelved since there's no incentive to change anything because of already having a monopoly. The result is stagnation.

[Campitor]

@ Bankia

You’re alphabet analogy falls apart in the face of piracy. In the alphabet soup scenario everyone is being stolen from and the market feedback problem I elaborated on in earlier post would come into effect. Similar issues would arise as mentioned in Jacob’s birthing forceps post.

Pirates of IP will not stop even if the cost is a minuscule.

[Bankai]

I don't see how market feedback problem would come into effect in case of physical stuff? It either sells or it doesn't. Do you think there's a market feedback problem in bread or housebuilding industries?

The birthing forceps example is an interesting one, however not sure how relevant to 21st century? It's not like you can hide something like that in the age of micro-cameras, and there aren't many (any?) low hanging fruits like that left in the first place.

[Jean]

We are now singing a piece that was commissioned for the opening of the Florence cathedral. It wasn't free. It was probably paid for by the bishophood at the time. The prestige of having hired a talented artist was enough of a reward for any one putting money into art.
You don't get extra happyness from touching millions of people with your art over touching thausends. Or maybe you do, but it scales logarithmicaly.
It's the same with any intelectual creation. They are the way to immortality. That's enough attractive for any sane person to doesn't require any additional financial compensation.
It's even worse, it funnels away brains from high prestige high use area (but were most patient are poor), to area were a lot of money could be extracted.
IP completly mess with capitalism. Everyone innovates. Knowing that you might have to fight for you rights to spread your innovation, because anyone with more money and legal advices than you could possibly succefully claim it, actually hinders innovation.

[Loner]

When innovation is no longer rewarded, the number of new products would decline. -> Perhaps incremental innovation. But so much of it is of dubious value. I doubt it for radical innovations. Those just aren’t susceptible to incentives very much. Whether in science, or arts, etc., humans have never come up with extraordinary ideas because some guy asked them to come up with them. ERE itself was born out of some personal creative obsession with pushing the boundaries of PF. It’s true that if there’s a lot of money slushing around, then maybe it’s provides a suitable context for the playful, stochastic tinkering (that leads to innovation) to happen. But I think that much more innovation is prevented from happening by having all those ideas locked up. Ultimately, I think we are left to discuss it on the philosophical level. I doubt one can really measure the net benefit of more vs less IP protection. The benefits and costs are just to hard to account for.

[jacob]

High-finance is a good example of a sector with insane amounts of innovation---attracting some of the highest paid researchers, very few of whom do it for the sheer pleasure of flipping numbers on a screen. However, because their research is so easy to copy (relative to how much it cost to create it), all this work remains proprietary to the company that developed it. It never gets shared outside the company that created it. As a result private investment companies remain very profitable using technology that's ~20 years ahead of what has so far diffused down to the retail consumers who remain stuck with index mutual funds and comparably clunky online stock trading---essentially an 1970s and 2000s technology respectively.

The few consumers who can afford it can get access to these tools at a steep price. Typical buy-ins would be $5M and up.

And the IP/tools will never be sold(*)---only the use of them.

(*) Until they've stopped working that is.

How does this happen? These companies just never bother to develop their research into a usable (commercial) product or even a product that can easily be used by other people than those who invented it. Instead all the energy is focused on using the product themselves until it doesn't work anymore and then researching up a new tool and using that up and so on. Everything remains at the prototype stage.

In terms of general innovation... since all this is proprietary, the public has to rely on universities which have far fewer resources. Thus academic insight also remains rather lagging. The most advanced books and papers being written by Nobel prize winners tend to be 10-15 years behind what has already been done unformally (less rigorously/good enough to just work) by these companies.

In summary, high-finance is an extreme example of the rational response to difficult research that's really profitable but also really easy to copy if you get the chance. As a result a small closed circle leaves the rest of the world behind. The rest of the world are certainly copying and incrementally innovating, but they're copying each other and their innovation is of the "how to slightly lower the fee on index funds" or "how to provide a more pleasant online trading experience"-variety, and thus the public's technology tree remains way behind the curve. Leading edge military technology is similar.

[tonyedgecombe]

You see the same thing in the software world, developers are moving away from software you can download and hence easily copy to systems delivered over the internet where you are never exposed to the valuable IP.

[Campitor]

I don't see how market feedback problem would come into effect in case of physical stuff? It either sells or it doesn't. Do you think there's a market feedback problem in bread or housebuilding industries?

Yes I do think there's a market feedback problem both in housing and bread. Wheat prices and home purchases are distorted by the government incentives and subsidies. The US market meltdown of 2008 was a result of government pressure on financial institutions to make loans to people who didn't have the capital or credit worthiness to qualify for a home loan. Financial institutions then bundled these bad loans into derivatives; their structure made it difficult to calculate risk thereby distorting market information. This distortion led to an incredible buying and building spree that ruptured the economy when people started to default on their loans.

The US government provides subsidies to farmers for soy, corn, wheat, cotton, and rice. These subsidies incentivize farmers to grow crops that may or may not be in demand. Without government subsidies wheat's use and price would correlate to its actual value and demand. Corn subsidies are king and hence the ubiquity of corn and corn fructose in everything. Land use is allocated to crops that may otherwise be replaced by plants that are in higher demand or crops that are better suited for their climate. Now lets talk about water use. Water use is also subsidized for farming which distorts the true cost of growing water thirsty crops - an issue in the arid areas of California and the midwest.

So yes - physical objects can and do experience market feedback problems which lead to price distortions and externalities.

[Riggerjack]

it seems I tend to think in manifestos...

I have been here before, when the forum was describing a rope, a snake, a wall or a spear, and I tried to describe the elephant. My tortured analogies prompting:

Riggerjack, honestly, I have no idea what the fuck you are talking about. If I had to guess, it seems, as usual, that you are requesting everyone on the board to view a very complex and variegated and interesting discussion with global repercussions through the heuristic of the fact that you apparently lay cable for a fucking living. And this is despite the fact that you have repeatedly demonstrated a gross unfamiliarity with the situation not to mention stating explicitly "its not your problem."

I only view you as someone who overextends their existential reality to the broader of the issues of the world, a trait that I find amongst the provincial. How this thread moved from Jeff Bezos in Queens to Riggerjack in buttfuck is beyond me but ultimately not surprising based upon my experience of contributing to threads with you on them.

And I laugh each time I read it.

So, today, I am going to try a different tack.

Because I agree with all the points raised so far, but none of the conclusions. Experience has shown me that I can't convey what an elephant is, but maybe if I help each of you see how each of your own descriptions relate to each other, a better understanding can be formed.

I'll be quoting, alot. I understand this is a bit a a peeve for some. If I knew a better way, I would use it.

Chesterton's fence: In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, "I don't see the use of this; let us clear it away." To which the more intelligent type of reformer will do well to answer: "If you don't see the use of it, I certainly won't let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it."

Amen, Brother.

Intellectual property doesn't exist in a vacuum especially on the internet. Every online book, movie, video, paper, etc., exists only because of the infrastructure in place. Hosting content online costs money. Some of this money is recouped and/or profits made by the selling of the intellectual property hosted therein. By stealing online content you're not just stealing from the creator but also from the people who depend on the revenue generated by the commercial activities on their site.

I completely agree with you. In fact, when you consider the typical split, you might say I am targeting the people who are depending on that revenue.

When revenues drop, businesses are incentivized to cut pay, lay off workers, or replace workers by automation. Despite what many may think, providing all this online content isn't cheap and it employs huge swath of people at various income levels.

Yeah, that's gonna suck. My career has been in wireline telecom, I can understand how tough that is to go through.

You can paint IP law as an anachronism rooted in the "King's Law" or a mechanism for funneling money to the wealthy but that doesn't lessen the impact on the lower wage workers involved in serving up the IP content. If you don't like IP law then you should work to change the law and not circumvent it via theft. When profits are diminished you either increase prices or diminish the cost of production by either 1) automating 2) lay offs 3) reducing quality to an acceptable threshold 4) exporting production to a lower wage economy.

Yes, I agree, one through four is definitely going to happen. I disagree with your conclusion. We are far from conclusions at this point. We haven't even sketchtched out the scope of this change, yet.

@riggerjack - So, just so we're all clear, you're advocating collective ownership of all intellectual property ? Lawfully selling bootleg DVDs of films and PDFs of bestsellers, as but one example ?

Actually, I am advocating relaxing our moral outrage, and looking at the change in the world, that we are talking about. (Though it may be hard to tell, I haven't thought about this in 15 years, and I'm afraid I used to be a much, much, angrier young man, and some of that was triggered. ) until we really look at that world, and compare it to our own, how are we to judge it?

This is easier, with fewer changes. So let's just consider how this works out if things progress fairly steady from here. Piracy is an outlaw activity, but not worth prosecuting. Like medical marijuana, semilegal in some places, less so in others.

What does this world look like?

The problem with getting rid of all intellectual property rights is simple. While the creator of intellectual property may not care if their creations are personally profitable and only desire to create universally beneficial items for the greater good, those who have the means to distribute IP at scale are not working for free. To deliver items at scale requires infrastructure and human personnel; all these items cost money. So these costs must be paid for either privately via voluntary transactions or by force via taxes.

I agree. But what if we don't go to the extreme, and get rid of all IP? What if we did what we are doing right now, as described in this thread? At similar rates? How does that look?

I wonder why your friends didn't get a sound legal opinion before signing the contract. Based on the facts you've told me, my sympathy for them is limited.

You really have no understanding of what the term "starving artists" refers to, do you?

In any event it sounds more like a case of contract law than specifically IP law.

And if I were advocating a change in law, this would apply. I'm not.

You seem to be of the opinion that creative types should also be good business types, or it's probably for the best that they signal an economically hazardous path. That is an odd filter. What are you looking for, and why? (Serious Question.)

How would you feel about me stealing your parent's art ? (Serious question)

Serious answer: I am a more civilized old man, than I used to be, so I would resist the urge to hunt you down.

On the other hand, if you want to make a copy, please help yourself.

Art and copies are not the same thing. They aren't even synonymous. The only reason we associate one with the other is that's how we traditionally delivered copies and payments. That seems to be changing.

Creation requires capital (human and logistical). The artist either needs a patron so he can be supported during the creative process or sufficient capital gained by personal savings or employment. So either the artist must raise his own money or find someone who thinks his creation is worthy of the money invested or donated. After the creation is made, someone has to bring this creation to the market and this has an associated cost. And barriers to entry are typically enforced or created by governments - you're not going to change this behavior by pirating. The only thing piracy guarantees is the distortion of market information, the reduced desirability of incurring the cost of bringing art/IP to the market, and the incentivisation of recouping costs via layoffs, automation, or price increases paid by the honest consumer.

Yes! This. What does this look like? Who gets paid? Who doesn't? How does this affect financing? How does the changes in finance change which projects are made, and the risks those projects can take to serve a more discriminating audience?

That's probably enough questions for one megapost. Sorry, if I taxed anyone's patience.

[enigmaT120]

Speaking for myself, you haven't. I'm sorry you didn't make it down for our Portland meet up and I hope you do some time.

[Campitor]

I completely agree with you. In fact, when you consider the typical split, you might say I am targeting the people who are depending on that revenue.

I'm struggling to understand your motivation or logic behind your reasoning. I offer up an analogy so you can tell me how what you're proposal is different: Farmers grow crops and depend on trains, trucks, and grocery stores to deliver it to the masses. Would you target the revenue trains, trucks, and grocery stores make from farming? If these businesses evaporated how would the farmer distribute his goods beyond the local farmer's market? How would people, who don't have any arable land themselves or the climate to grow desired crops, get the food staples they desire? How are the deliverers of IP any different than those trains, trucks, and grocery stores?

Yes, I agree, one through four is definitely going to happen. I disagree with your conclusion. We are far from conclusions at this point. We haven't even sketchtched out the scope of this change, yet.

My conclusion was that lower wage jobs in IT would be outsourced to offset the cost of piracy. I work in IT. Jobs are being outsourced as I type. I interact almost weekly with India based IT support on software debugging that used to be done in the USA as recently as this year. All these changes are done to lower the cost of IP and IT in order to maximize profits. Piracy affects profits. While piracy may not be a primary reason for outsourcing, it certainly isn't a trivial item on the scales of cost reduction that incentivize outsourcing in the first place.

What conclusions and scope did you have in mind?

I agree. But what if we don't go to the extreme, and get rid of all IP? What if we did what we are doing right now, as described in this thread? At similar rates? How does that look?

Considering the current explosion of technology and the IP hosted therein, It doesn't look like the barn is anywhere close to burning so I'd say there's no need to get extreme. I do believe there has to be a change - shorter patent durations perhaps or loss of patent if it's not actually undergoing active development. Or maybe opening up the patent to mandatory licensing if it's not brought to market within a specific time frame, etc.

[Riggerjack]

I'm struggling to understand your motivation or logic behind your reasoning. I offer up an analogy so you can tell me how what you're proposal is different: Farmers grow crops and depend on trains, trucks, and grocery stores to deliver it to the masses

I'm proposing that rather than model this as being similar to/ different from other business models, we look at what is really going on in this business, with these changes.

I agree that all of the (bad) things you describe are happening, and that file copying is a primary driver. OK. So what happens next? What is cheaper, what is more expensive? How is the market changed?

You have a finely developed economic lens, that seems to be your primary tool for mapping change, I'm asking that you use it.

Please.

[ertyu]

I disagree with drawing a link between piracy and outsourcing. Yes, lower profits from piracy may have been one factor that sped up the outsourcing. But even without piracy, outsourcing would still be taking place. This is because the main driver of outsourcing is the ratio between labor/transportation costs. IT has 0 transportation cost (internet). So while there is labor cost disparity, outsourcing in IT will exist.

[chenda]

@Riggerjack Honestly hun I'm also struggling to see what the fuck it is you are on about, so I'm going to bow out here at let someone else decipher your lengthy cryptic weirdness to see if contains any profound wisdom or is just complete Tommy rot...

[Riggerjack]

I'm going to bow out here at let someone else decipher your lengthy cryptic weirdness to see if contains any profound wisdom or is just complete Tommy rot...

Ok. Sorry to lose you. But maybe I am wasting everyone's time, and I am just full of Tommy rot. Please check back, later, and let me know what you think.

[Riggerjack]

I disagree with drawing a link between piracy and outsourcing.

I agree. But where work goes, and who does it is critical to understanding how this works out.

From a native creative worker's perspective, product getting less profitable, and outsourcing seem intertwined.

From the outside, though, it's clear that the portable work will be done with geoarbitrage, if available.

That availability, in the form of Asian coding, coincides with file sharing popularity, so it's easy to conflate these two.


To readers, though I am quoting specific members, my questions are for the general audience.

[Campitor]

I disagree with drawing a link between piracy and outsourcing. Yes, lower profits from piracy may have been one factor that sped up the outsourcing. But even without piracy, outsourcing would still be taking place. This is because the main driver of outsourcing is the ratio between labor/transportation costs. IT has 0 transportation cost (internet). So while there is labor cost disparity, outsourcing in IT will exist.

I can't speak to the rest of the world but in the USA, the internet infrastructure is maintained by private companies. Verizon, Comcast, etc., control the point of use infrastructure and other companies are responsible for the infrastructure outside of the cities (the low population areas that fiber and cable need to be laid in order to connect major cities). Fiber needs to be maintained, the electricity that powers the internet has to be paid for. The various vans, trucks, cable, switches, fiber, etc., are hard goods that need to be purchased and replaced. All of this has an associated cost. So I say this humbly - you're mistaken - the internet most definitely has a cost. I recommend you to research it so you're better informed.

In any business, the most expensive part of operations is the human capital, at least in the United States. The desirability of outsourcing is squarely inline with business needs and expenses. There are risks to outsourcing such as response time, data breaches, or outages caused by outsourced resources. If you can provide superior performance at an acceptable price, the outsourcing desirability drops off significantly if profits are within an acceptable range; companies like to keep assets under their direct control as much as possible. Piracy steals from profits which makes it harder for inhouse individuals to provide services at an acceptable cost when profits are getting slammed - especially as government keeps forcing the cost of employment higher via mandated benefits. When people pirate software, they're stealing from a long line of people, many who are just trying to make a decent living.

If I get laid off because of outsourcing, I know I can find another job. It may not pay as much as I earn now but since I'm frugal, a cut in pay will not hurt me as much as someone lower down the pay scale. And a loss of employment in the rural part of America will be much harder to recover from.

[ertyu]

@Campitor: we might be veering off topic, but consider. You're a US software company. Someone in india writes code for you. How much does it cost you to "transport" their output to the US? The infrastructure already in the ground that a telecom put in is a sunk cost. Yes the telecom needs to recoup it, but your transportation cost per unit code, as an IT company, is negligible even if you pay your internet and electricity bill.

I agree piracy hurts profit. But piracy is not responsible for outsourcing. Outsourcing would happen with or without piracy.