Technology can certainly make for some interesting clashes with regulatory regimes. Social networking, for example, starts to bring up all sorts of questions about the fine line between certain regulated areas of advertising, and basic free speech communication issues. Eric Goldman points us to the news that the FDA is warning pharma giant Novartis (pdf) over its use of a "Facebook Share" widget on its site promoting the drug Tasigna (a leukemia drug).
The specific complaint is that the "share" feature includes promotional material about Tasigna, but not all of the associated risks (and, as with so many drugs, there's quite a list of risks). Because of the limited amount of space often used in "sharing" content, the FDA feels that some of the sharing options are misleading, not correctly noting that the drug is only approved for some users.
The shared content is misleading because it
makes representations about the efficacy of Tasigna but fails to communicate any risk
information associated with the use of this drug. In addition, the shared content inadequately
communicates Tasigna’s FDA-approved indication and implies superiority over other
products. Thus, the shared content for Tasigna misbrands the drug in violation of the Federal
Food, Drug, and Cosmetic Act (the Act) and FDA implementing regulations.
The FDA even picks on the specific word choices in some of the sharing features, such as calling the drug a "next-generation" drug, which apparently implies it's better than other drugs in the space when that might not be the case. Advertising and marketing for pharmaceuticals has always been a contentious area, and I believe that many countries ban it, while the US allows it. But with the internet and social networking, the line between advertising and communication can start to blur. Yes, it may be problematic if Novartis is suggesting people "share" misleading or incomplete info about the drug, but what if people just start sharing that info on their own? Where do you draw the line?
A few months back, we wrote a bit about Matt Ridley's new book called The Rational Optimist. I still haven't had a chance to read the book, but reader sehlat points us to an essay that Ridley has written for Reason Magazine that is adapted from the book, which is an absolute must read, on how innovation occurs. Many of the points won't surprise regular readers of Techdirt, since it talks about concepts and studies that we've discussed many times before. For example, it discusses some of the same research we recently wrote about how government funding of basic science research often does more harm than good for innovation. It also explains how money is often not a key ingredient in innovation. It's helpful, yes, but not the key ingredient. There's a nice bit on the fact, as discussed time and time again around here that intellectual property laws have never been shown to increase innovation:
Yet intellectual property is very different from real property, because it is useless if you keep it to yourself, and an abstract concept can be infinitely shared. These features create an apparent dilemma for those who would encourage inventors. People get rich by selling each other things (and services), not ideas. Manufacture the best bicycles, and you profit handsomely; come up with the idea of the bicycle, and you get nothing because it is soon copied. If innovators are people who make ideas, rather than things, how can they profit from them? Does society need to invent a special mechanism to surround new ideas with fences, to make them more like houses and fields?
There is little evidence that patents really drive inventors to invent. In the second half of the 19th century, neither Holland nor Switzerland had a patent system, yet both countries flourished and attracted inventors. The list of significant 20th-century inventions that were never patented includes the automatic transmission, Bakelite, ballpoint pens, cellophane, cyclotrons, gyrocompasses, jet engines, magnetic recording, power steering, safety razors, and zippers. By contrast, the Wright brothers effectively grounded the nascent aircraft industry in the United States by enthusiastically defending their 1906 patent on powered flying machines.
So what is it that leads to innovation? Well, it's the sharing of ideas and building upon them -- again, a point raised here time and time again. Ridley describes it as "ideas having sex." This isn't a new idea (though it's "newish"). In the past thirty years, a growing number of economists have recognized that economic growth comes from the collision of information and new ideas, shared openly. As Ridley notes: "Innovators are in the business of sharing." While he doesn't bring this up, there's actually a tremendous amount of research that show that communities that more widely and openly share ideas tend to have greater innovation (and, no, that doesn't mean through such false disclosure systems like a patent system -- which teaches little, and doesn't let anyone really make use of the knowledge shared). But the key point that Ridley makes is that innovation happens when people keep building on what's been done before:
The secret of the modern world is its gigantic interconnectedness. Ideas are having sex with other ideas from all over the planet with ever-increasing promiscuity. The telephone had sex with the computer and spawned the Internet.
Technologies emerge from the coming together of existing technologies into wholes that are greater than the sum of their parts. Henry Ford once candidly admitted that he had invented nothing new: He had "simply assembled into a car the discoveries of other men behind whom were centuries of work." Inventors like to deny their ancestors, exaggerating the unfathered nature of their breakthroughs, the better to claim the full glory (and sometimes the patents) for themselves. Thus, Americans learn that Edison invented the incandescent light bulb out of thin air, when his less commercially-slick forerunners, Joseph Swan in Britain and Alexander Lodygin in Russia, deserve at least to share the credit.
It's a great read that really highlights and ties together many of the points I've written about here for years.
Glyn Moody points us to the news that BP has apparently been hiring up a bunch of local scientists associated with various Gulf Coast universities to study the impact of the oil spill. While some might suggest at least BP should be paying for some of the analysis of the damage it has done, the details suggest that this is more about silencing the scientists. That's because part of the contract it's making them sign is an agreement that they won't publish or share their data for at least three years. That's generally not how scientists work. They look to share data with others and to publish frequently. When one university told BP it couldn't accept such confidentiality requirements, BP went elsewhere. In other words, it's pretty clear that this has nothing to do with actually understanding and letting the world know what has happened. It's about keeping it quiet for as long as possible.
Reader Dementia points out this amusing example of newspapers and their paywalls, combined with the newspapers clearly not even realizing what their stories and headlines say. In this example, it's the Leader Telegram newspaper in Eau Claire, Wisconsin, which has an article entitled Bronze Star stories worth sharing. Sounds great, right? Only problem? If you open up the article, you get two paragraphs deep before you're hit with a paywall. So, apparently, the stories are only worth sharing if you pay, and then the people you share them with will have to pay as well. That seems rather obnoxious, doesn't it? "Hey, why don't you share these stories and make your friends and family pay to read them?" Generally speaking, if you're suggesting people "share" your stories, how about you make them shareable?
Stephan Kinsella sends over a fascinating talk by Dr. Terence Kealey, a UK biochemist and professor, discussing why -- contrary to what most people think, "science" is not a public good, and that government-funded science actually tends to do more damage than good for global economies:
Many of the points raised actually apply to issues related to patents as well. For example, he starts out by quoting Francis Bacon, who defended the idea of governments funding science by claiming (as we often hear about patents), that if an individual invests in research, it will cost a great deal to do so, but any competitor can then copy the results for free. And thus, Bacon concluded, science was a form of a public good which the government should fund. Sound familiar?
The problem, it turns out, is that as with patents there is no actual data to back this up. Kealey points out that there is no historical or econometric data anywhere that supports this claim. For example, he points to the OECD's sources of economic growth report (pdf), where it found very high correlation between economic growth and countries that had high levels of private R&D. When it came to publicly supported R&D, the report found no impact on economic growth... but, more worrying, it found evidence that public funding of science tended to crowd out private funding of R&D, which (again) correlated highly with economic growth. Now, of course, correlation is not causation, and there may be many other factors at play here. However, it is interesting that there doesn't appear to be any direct evidence that public expenditure in science leads to economic growth.
Dr. Kealey points out that many people believe in the importance of public funding of science based on the same thinking as Bacon above: the idea that science is a public good. That is, that once it's out there, anyone can use it -- and thus, it either needs to be enclosed and limited in some manner, or funded by the government. In the last couple decades, however, more and more economists have begun to realize that this thinking on public goods is not only overly simplified, but it's often wrong. It appears to be the case here again. Kealey points out that science is not, in fact, a public good.
Why? Because of a combination of social mores and the need to do your own research to understand what others are doing:
The standard story... was that science was a public good, in the sense that anybody can go to the journals -- or the internet today -- and pick up the Journal of Molecular Biology and read the papers for free... We can get it for nothing. Or we can go to the Patent Office, which very kindly publishes all this stuff... and read all the patents... and get ideas, blah blah blah.... We all know that "science is publicly available," and therefore is easy to copy and all the rest of that.
But hold on a second.
How many people in this room can read the Journal of Molecular Biology. How many people in this room can read contemporary journals in physics? Or math? Physiology? Very, very few. Now the interesting thing -- and we can show this very clearly -- is that the only people who can read the papers, the only people who can talk to the scientists who generate the data, are fellow specialists in the same field. And what are they doing? They are publishing their own papers.
And if they try not to publish their own papers... If they say, 'we're not going to get engaged in the exchange of information; we're going to keep out of it and just try to read other people's papers, but not do any research of our own, not make any advances of our own, not have any conversations with anyone,' within two or three years they are obsolescent and redundant, and they can no longer read the papers, because they're not doing the science themselves, which gives them the tacit knowledge -- all the subtle stuff that's never actually published -- that enables them actually to access the information of their competitors.
This is a huge point that fits with similar points that we've made in the past when it comes to intellectual property and the idea that others can just come along and "copy" the idea. So many people believe it's easy for anyone to just copy, but it's that tacit knowledge that is so hard to get. It's why so many attempts at just copying what other successful operations do turn into cargo cult copies, where you may get the outward aspects copied, but you miss all that important implicit and tacit information if you're not out there in the market yourself.
He then goes on to discuss the Royal Society of London, which encouraged scientists to publish their own research, and points out that while initially, people might think that it was better to not be a member, not publish your information and just scoop up what others had done, in practice that wasn't the case. Why? Because the members of the society beyond publishing themselves, also had much greater access to all the other members as well, allowing them to continually further their own knowledge. In other words, the argument that researchers or competitors will prefer to keep their inventions secret via trade secrets goes out the window when companies realize that by sharing more freely their own inventions, they also get greater access to the inventions of others.
What's interesting here is that this story of the Royal Society and the benefits of membership actually fit -- almost exactly -- the research on why Silicon Valley became such a huge success when compared to other, similar arenas. What that research showed was that due to a lack of noncompete agreements in Silicon Valley (where they are outlawed), the rate of job shifting was much higher. And, partly because of that, information flowed much more quickly between competitors. While one might normally think this is a bad thing, what actually happened was it allowed all the companies in that space to grow much faster, because the knowledge sharing led to faster and faster advancements for all. Rather than being limited to just what one group could figure out, they could all effectively build on each other's knowledge as well -- and the end result was much greater growth for all.
But, still, as with the situation that Dr. Kealey describes, there had to be a level of expertise from everyone involved. It wasn't as if some other party, with no knowledge of the space at all could just copy it. So too, it appears to be, with scientists:
You can't access the science of others unless you're part of the game. It is only the molecular biologist who is publishing his own papers, getting invited to the conferences, having the discrete conversations with other fellow molecular biologists, who can capture the work of others. And so you don't get the information for free. You pay a very high price to access the information of your fellows. Science is not a public good.... It costs as much to access information as it does to make it. It's just that the cost of accessing is the subtle parallel cost of the work you have to do before you're ready to read it. And, as a part of that, you're contributing to the common pool of knowledge.
From there, he discusses the famous story of how the Wright Brothers and their patents effectively killed the aviation industry in the US until the government stepped in to force them to open up. And from there, he makes the point that I was discussing above about the research on Silicon Valley:
What is really interesting about the exchange of knowledge, is the work of von Hippel and others at MIT Sloan Management School: industrial scientists collude -- or I don't know what word you want to use -- exchange information all of the time. Even competitors. It's a straight quid pro quo. Just like academic scientists. von Hippel showed, for example, the 12 leading steel makers in America... 11 of them routinely met discretely, and exchanged information as quid pro quos. It's a very nice model, economically. There is actually shared knowledge amongst scientists. One of the leading economists of science -- I'm not going to name all the names because it's boring -- but he's showed that there are no industrial secrets in America or in Britain or in the West. Scientists at the level of research, in companies, exchange so much information, that no secrets exist more than about a year, a year and a half....
...
Scientists discovered a very long time ago that their own self-interest is assured if they share knowledge with competitors. Because the ones that don't share knowledge, whether they're academic scientists looking for their Nobels or business scientists looking for money, that if they don't share, they will absolutely get left behind.
It's great to see that there's even more research on this particular subject than I had been aware of before, but which confirms many of the points that I've been making for years.
I've been noticing a trend lately of content creators who discover unauthorized copies of their works are being shared actually responding somewhat reasonably to it. In almost every case, the story starts out with a claim of how they were upset and annoyed at first... but quickly got over that. In the past few days, I've come across two more such examples. The first, from the LA Times, involves the producer of the movie Unthinkable, starring Samuel Jackson. Apparently, due to the studio that financed the flick going under, the film suddenly was without domestic US distribution rights, and couldn't find any fast enough. So it went direct to DVD. But... before the DVD came out, the film leaked, and it's now one of the most talked about films on IMDB, even though it hasn't even been released!
The producer notes that he had very mixed feelings about the whole thing:
"I've been unbelievably torn over the whole thing," says [producer Cotty] Chubb, best known for having produced such films as "Eve's Bayou," "Dark Blue" and "To Sleep with Anger." "It's tremendous to go on IMDB and see that our user rating is 7.3, which is the highest rating of any movies in the current Top 10 there -- you have to go down to 'Iron Man 2' to find a higher rating. But on the other hand, while everyone is debating all these important moral questions, I want to ask them another important question -- hey, guys, what about the morality of watching this movie on the Internet for free?"
Of course, rather than freak out, or threaten to sue, Chubb just asked people exactly what he wanted to ask. He posted a comment himself, politely asking those who had seen the movie directly on IMDB about what their feelings on downloading the film were, and whether or not there was a price they would pay for it, while also noting that he was quite "grateful" for all of the attention the movie was getting due to the downloads.
After tons of people responded -- almost all of whom saying that there's nothing wrong with downloading a film -- Chubb didn't freak out, but recognized the onus is on himself and the industry to respond:
"We've got to come up with a new model, because the old one just isn't working anymore," says Chubb. "You just can't fight against a model where the movie is available for free. People clearly want to download movies online, so it's time we figured out how to get some money out of it."
Similarly, here's a totally different story, about author Peter Nowak discovering that his latest book was available for unauthorized download. Again, his feelings were mixed, but he eventually realized that getting angry and fighting this served no useful purpose:
My initial reaction was shock - how dare someone rip off something that I put so much work into? For a moment, I completely understood Lars Ulrich, the Metallica drummer who years ago became the poster boy for the anti-file-sharing establishment when he and his bandmates sued Napster.
Fear not, though - my anger was short-lived, and not just because I'd like to avoid becoming a self-important douche like Lars at all costs. I'm certainly not the first author to get pirated, and I won't be the last. It's an inevitable reality that everyone today must face. And no, I don't think any number of Draconian copyright laws are going to change this. Technology has let the cat out of the bag, permanently.
As someone who has partaken of the occasional Torrent, it would be hard (and thoroughly hypocritical) for me to be angry. I'm also not of the mind that file-sharing necessarily hurts the artist or creator. In my experience, most people who download something for free weren't going to buy it anyway, or they already have and just want a digital copy, so it's not exactly a lost sale. Moreover, if they like the product they've downloaded, they may recommend it to someone else, who in turn may actually choose to buy it. In a way, the so-called "pirate" can become a good sales advocate.
In fact, he then notes that there are plenty of examples of authors using such publicity to their advantage, while also realizing that some of the problem is that his book doesn't have an official ebook version yet, though he's now working hard to make that happen as soon as possible.
I think it's completely normal and natural for people to have that initial negative reaction -- especially if they don't follow some of the details of what's happening and how such file sharing has helped some do much better than they would have otherwise. But it's especially nice to see more and more content creators get over that initial shock, and then start to logically look at the situation, and realize that what consumers really want is something different than is being provided, and the responsibility is on the content creator to better provide consumers what they want.
Don Bartlett, who manages a variety of music acts, and who has guest posted in the past, alerted us to a recent blog post by a band he works with, called Skybox, explaining their views on file sharing. Like many smart music acts these days, the band is totally cool with people downloading their stuff, but they add one addition to it: if you're going to share it, then really share it and spread it to others:
So here is our win/win proposal to people who download the record from a filesharing site: If you like the album, pick your favorite song and email it to 10 of your friends. Simple as that. That way you get to enjoy the record AND our music gets promoted. If you're feeling really ambitious, post a link to our new video on your twitter or facebook. Or use the "share" button on all of the players on our site... they're easy as hell to use and are a simple way to have your friends check out our music. You get the idea.
It's nice to see a band not just recognize that file sharing isn't necessarily a bad thing, but also recognize the increased benefit from the actual sharing, while encouraging more such sharing.
There's been plenty of coverage of Clay Shirky's recent talk at SXSW where, among other things, he discussed the impact of Napster on our culture. As per usual with Shirky, he made a bunch of fantastic points, often presenting a perspective that is unique and makes you think. I just wanted to pick up on one point, however, because I've been hearing the following argument a lot lately: file sharing needs to be "stopped" because this widespread "illegality" is teaching kids to not have respect for the rule of law. Even Larry Lessig has been known to make this point. Yet, Shirky quickly debunks it in his talk:
In the Napster era, some attributed the ascent of pirated digital music to a supposedly criminal-minded nature among American youth. The argument didn't work. "It coincided with the largest fall in the rate of crime in recorded history," Shirky said.
People aren't file sharing because they don't respect the rule of law. They're file sharing because that particular law doesn't make any sense to them. The idea that people jumping on the file sharing bandwagon will start breaking other laws appears to have no empirical backing whatsoever.
Lots of folks have been sending in the "news" about news consumption from a new Pew study. A lot of the attention being paid to the study focuses on how more people are using the internet for news than newspapers, but that was an obvious trend. What I find a bit surprising is how few people seem to be talking about one of the other findings: that so many people are actively involved in "shared news." That is, they either share news links or get news links from others on a regular basis. This is something we've discussed for the better part of a decade, but which many in the news business still don't get. When they put up paywalls and even registration walls to limit access to the news, they make it difficult to impossible for people interact with the news the way they want to. It shows that publishers still have a mentality that they are "delivering" a final product to consumers -- whereas most readers now think of themselves as a part of the process, hoping to spread the news to others, to comment on the news, and to be a part of the overall experience. The Pew study found that 75% of people get news sent to them by friends via email/social networks and 52% take part in sharing links. That becomes a lot harder with paywalls.
For many, many years, the classic example we'd use of a band who knew how to really connect with its fans (and give them a reason to buy) was The Grateful Dead -- who were, for years, the highest grossing band around, despite encouraging widespread sharing and trading of their taped shows (which they made easy for fans to tape). So while this article is really nothing new, it's nice to see this article about the band highlight some of how the band handled these things (thanks to Dave W for sending this in). While the band has always been very aggressive (too much so, in my opinion) in trying to enforce its copyrights over any kind of commercial use, it basically ignored them for non-commercial use:
ODDLY ENOUGH, THE Dead's influence on the business world may turn out to be a significant part of its legacy. Without intending to--while intending, in fact, to do just the opposite--the band pioneered ideas and practices that were subsequently embraced by corporate America. One was to focus intensely on its most loyal fans. It established a telephone hotline to alert them to its touring schedule ahead of any public announcement, reserved for them some of the best seats in the house, and capped the price of tickets, which the band distributed through its own mail-order house. If you lived in New York and wanted to see a show in Seattle, you didn't have to travel there to get tickets--and you could get really good tickets, without even camping out. "The Dead were masters of creating and delivering superior customer value," Barry Barnes, a business professor at the H. Wayne Huizenga School of Business and Entrepreneurship at Nova Southeastern University, in Florida, told me. Treating customers well may sound like common sense. But it represented a break from the top-down ethos of many organizations in the 1960s and '70s. Only in the 1980s, faced with competition from Japan, did American CEOs and management theorists widely adopt a customer-first orientation.
As Barnes and other scholars note, the musicians who constituted the Dead were anything but naive about their business. They incorporated early on, and established a board of directors (with a rotating CEO position) consisting of the band, road crew, and other members of the Dead organization. They founded a profitable merchandising division and, peace and love notwithstanding, did not hesitate to sue those who violated their copyrights. But they weren't greedy, and they adapted well. They famously permitted fans to tape their shows, ceding a major revenue source in potential record sales. According to Barnes, the decision was not entirely selfless: it reflected a shrewd assessment that tape sharing would widen their audience, a ban would be unenforceable, and anyone inclined to tape a show would probably spend money elsewhere, such as on merchandise or tickets. The Dead became one of the most profitable bands of all time.
The article goes on to talk about how lots of people are just now starting to look back at how The Dead ran their business to understand how to run modern customer-focused businesses today -- ones that recognize when it makes sense to let people do things that legally could be stopped (if not in reality) and how to take advantage of those situations. It's a good read.
