Jaron Lanier's Ignorance Of History, Basic Economics And Efficiency Is Getting Ridiculous

from the please-make-it-stop dept

So... we'd already taken a stab at debunking Jaron Lanier's "gobbledygook economics" a few weeks back when it started appearing, but since then there's been more Lanier everywhere (obviously, in coordination with his book release), and each time it seems more ridiculous than the last. Each time, the focus is on the following economically ridiculous concepts: (1) there should be micropayments for anyone doing anything free online because someone benefits somewhere (2) modern efficiency via technology has destroyed the middle class. Both of these claims make no sense at all.

Let's start with Lanier's interview with fellow hater of the internet, Scott Timberg, at Salon, in which Lanier trots out this catchy line that is so braindead it made me wonder why Salon would sully its reputation by publishing something so easily proven stupid:

So Kodak has 140,000 really good middle-class employees, and Instagram has 13 employees, period. You have this intense concentration of the formal benefits, and that winner-take-all feeling is not just for the people who are on the computers but also from the people who are using them. So there’s this tiny token number of people who will get by from using YouTube or Kickstarter, and everybody else lives on hope. There’s not a middle-class hump. It’s an all-or-nothing society.

The Kodak/Instagram comparison comes up over and over again, and it's moronic. It makes no sense. To demonstrate, let's take something else that's old and something else that's modern that sorta-kinda seems similar, and compare the two: Very, very, very few people make money "auctioning" goods via Christie's. Yet, a few years ago, eBay noted that 724,000 Americans made their primary or secondary incomes from eBay sales, with another 1.5 million supplementing their income. In the simplistic world of Jaron Lanier, this should be proof that eBay is good, and Christie's is bad, right? But, of course that's silly.

The fact that Instagram only employed a few people and Kodak employed a lot says nothing about the impact of technology on modern society or the economic status of the middle class. Even if we take the ridiculous leap and pretend that the two companies are somehow equivalents (and they're not even close), you could just as easily point out that Instagram created a lot more value for people than Kodak did. First off, it didn't involve toxic chemicals that create massive amounts of waste and pollution. Second, because people don't have to buy expensive rolls of film to take pictures any more, they get to save money and put it to better use. Third, because we no longer have to worry about the expense of each photo, people are free to take many more photos and capture more memories and generally enjoy photography more. Fourth, because instagram makes the sharing of photos much easier, it enables much greater communication among family and friends, building stronger community bonds. I mean, you could go on and on and on.

But I'll let economics professor Donald Boudreaux go even further and explain how just because one company or industry employed a lot of people at one time, it doesn't mean crap about how modern technology is "destroying jobs" because it's just not true.

Mr. Lanier sounds profound, I suppose, to people unfamiliar with history. So let’s re-write Mr. Lanier’s prose just a bit in order to put his fears in historical context:

“At the height of its power, agriculture employed 90 percent of the population and produced output worth vastly more than half of U.S. GDP. It even invented countless plant hybrids and animal breeds. But today nearly all farms of the past have gone bankrupt (or, seeing the economic writing on the wall, were transformed to other uses). Agriculture today employs only about one percent of the workforce. Where did all those jobs disappear? And what happened to the wealth that all those good agricultural jobs created?”

Economic efficiency often shifts jobs around, but creates a much larger pie, which leads to new job creation. We can reasonably question whether the there are people who get left behind, or what kinds of skills are favored as industries become obsolete, but the idea that it destroys a middle class is just silly.

But it gets worse. Lanier repeatedly claims that the only reason we have jobs today is because of some sort of "social contract" that has been broken:

We kind of made a bargain, a social contract, in the 20th century that even if jobs were pleasant people could still get paid for them. Because otherwise we would have had a massive unemployment. And so to my mind, the right question to ask is, why are we abandoning that bargain that worked so well?

When did "we" make this "bargain" and, honestly, what is he talking about? There was no such bargain made. Jobs have nothing to do with whether they are "pleasant." And we didn't create jobs to avoid unemployment. We created jobs because there was demand for work, meaning there was demand for products and services, just as there still is today. But he doubles down on this crazy thought and says that when old jobs became obsolete it was this non-existent "social contract" that created new jobs:

Of course jobs become obsolete. But the only reason that new jobs were created was because there was a social contract in which a more pleasant, less boring job was still considered a job that you could be paid for. That’s the only reason it worked. If we decided that driving was such an easy thing [compared to] dealing with horses that no one should be paid for it, then there wouldn’t be all of those people being paid to be Teamsters or to drive cabs. It was a decision that it was OK to have jobs that weren’t terrible.

I'm just left shaking my head here because this statement is so ridiculous and so ignorant that it, alone, should cause people to assume that Lanier knows absolutely nothing about economics or history. New jobs were created because of demand, and because new technologies create efficiencies which create and enable new jobs. It has nothing to do with "decisions" being made or "social contracts." It has to do with efficiency and new things being enabled through innovation.

Next up, Lanier did an interview with Eric Been at the Nieman Journalism Lab and it was more of the same, except here he lays out his "theory" for a massive system of micropayments, in which any time you do anything that provides useful data to someone else, they need to pay you royalties. Let's take one example and think about how insane this process would be:

So, for instance, let’s suppose you translate between languages, and some of your translations provide example phrase translations that are used in automatic translators. You would keep getting dribbles of royalties from having done that, and you start accumulating a lot of little ways that you’re getting royalties — not in the sense of contractual royalties, just little payments from people that are doing things that benefited from information you provided. If you look at people’s interest in social networking, you see a middle-class distribution of interest. A lot of people would get a lot of little dribs and drabs, and it would accumulate over a lifetime so you’d start to have more and more established information that had been referenced by you that people are using. What should happen is you should start accumulating wealth, some money that shows up because of your past as well as your present moment.

Well, if he wants to create jobs, I guess adding the most incredibly massive inefficient bureaucracy and tollbooth for sharing any bit of information is one way to do so. The fact that it would cause the internet economy to come to a screeching halt apparently isn't figured into all of this. There are tremendous benefits to information sharing and information exchange. Putting a price tag and an ongoing royalty on every single such action would make it incredibly expensive to do anything that involves information, which would mean less information sharing, less information exchange and less benefit from that information.

This is the broken window fallacy exploded exponentially for a digital era. It seems to assume that the only "payment" is monetary. That is, if you do something for free online -- share a video or a photo, like a link, listen to a song -- that you're somehow getting screwed because some company gets that info and you're not getting paid. But that's ridiculous. The people are getting "paid" in the form of the benefit they get: free hosting and software for hosting/streaming videos and pictures, free ability to communicate easily with friends, access to music, etc. The list goes on and on, but Lanier seems to not understand the idea that there are non-monetary benefits, which is why various online services which he seems to hate are so popular.

Finally, we've got Quartz publishing Lanier's own piece claiming that "free information will enslave us all." Here he focuses on another one of his myths:

A token few will find success on Kickstarter or YouTube, while overall wealth is ever more concentrated and social mobility rots. Social media sharers can make all the noise they want, but they forfeit the real wealth and clout needed to be politically powerful. Real wealth and clout instead concentrate ever more on the shrinking island occupied by elites who run the most powerful computers.

This is bullshit, plain and simple. Under the "old" system, you had a smaller "token few" who found success via getting a major label contract or having a publisher accept them into the club of published authors. Most people who wanted to create did so as a total hobby and made no money whatsoever from it. You had a tiny tiny few who were able to do so. Today, lots of people can make some money creating -- it may not be a huge amount for all, but almost anyone can make some amount, and some of them can make a good amount, and unlike before the creators themselves are in control now. They're not signing contracts that give away 90% of the revenue and all control over their works. They still control it and they control where most of the revenue goes.

In fact, as I was finishing up this post, I saw the news that Kickstarter had now surpassed 100,000 projects, 44% of which got funded to the tune of $535 million. And the site has only been around for four years (and there are many more crowdfunding platforms). Compare that to the success rate of someone ten years ago who wanted to make a career in music. They likely wouldn't even get in the door. And, even if they did, the labels admit that nearly all signed musicians end up failing out of the system. This system seems a hell of a lot better.

It's as if Lanier is talking about a mythical past that never existed to make some point about the future. But all of the evidence suggests that more people are now able to make use of these tools to create new incomes and new opportunities to make money, while in the past you had to wait for some gatekeeper. Lanier, a beneficiary of the old gatekeepers, may like the old system, but he's confused about history, facts, reality and economics in making this ridiculous argument -- and it's a shame that those interviewing him or publishing his ridiculously misinformed screeds don't seem to ever challenge him on his claims.

Filed Under: capitalism, economics, efficiency, jaron lanier, jobs, social contract

Jaron Lanier And Gobbledygook Economics

from the that's-not-actually-true.-at-all. dept

Okay, okay. So many people have been submitting Jaron Lanier's latest Wired opinion piece, which is really an excerpt from his new book, Who Owns the Future?, that clearly it needs some sort of response. As you may recall, Lanier trades on his cred as an early-digerati-turned-contrarian to sell lots of books about just how awful the digital world is these days. Of course, any competent look at his claims almost always shows an incredible amount of flat-out wrongness to such a level that it defies belief that Lanier could honestly believe what he is saying.

If one hoped that his latest work would be a trip back towards reality, they will apparently be sadly disappointed. Instead, unfortunately, it appears that Lanier has moved even further away from an accurate model of how the world works, instead preferring to tell us all how he thinks the world works, despite the fact that reality, and all of the data, contradicts his beliefs. I am actually in the middle of (re-)reading a book about the history of economics, and there's a great section on two of the earliest economists, Thomas Malthus and David Ricardo, who both constructed some of the earliest "economic models," which predicted that we were a doomed species (and very soon). Both were extremely incorrect, in part because they failed to understand the basic economic nature of knowledge and how it creates increasing returns, but rather could only see a world in which diminishing returns resulted in inevitable end of all of civilization within a period of probably just a few decades.

Lanier's predictions remind me very much of David Ricardo, in particular. Despite the evidence of new wealth creation from industrialization, Ricardo dismissed it all as a passing fad, and rather was sure that we were in a complete death spiral due to diminishing returns to land. Ricardo's main problem was that he really only focused on one variable in the market, and more or less refused to look at the market ecosystem as a whole. Furthermore, in looking at a single variable -- in Ricardo's case, the price of corn -- and then extrapolating that if it was going up, it would go up forever, and suddenly people wouldn't be able to afford food anymore and society would collapse.

With Lanier, we see something similar, in that he extrapolates out the amount that people pay for music, and assumes that (1) forever will it go down and (2) that this spiral downward will have ripple effects throughout all of society. The problem is, as with Ricardo, the basis of nearly everything he states is not true.

When copying is easy, there is almost no intrinsic scarcity, and therefore market value collapses.

As we have explained many times before, Lanier is confusing price and value. The price of something may decline, but that does not mean the value of it declines. Two quick examples should demonstrate this. All of us value air quite a bit. So much so that we would all die without it. Air has, effectively, infinite value to nearly all of us, save the miniscule population who wish to commit suicide by way of suffocation. And yet, the direct price that we all pay for air tends to be zero in most cases (scuba divers being one tiny exception). The price is certainly not correlated with the value.

My second example may be more directly clear for those who refuse to see air as a product. The price of computing has declined precipitously for decades, while the power behind the computing has increased even more tremendously. This is often referred to as Moore's law, which has continued to hold true for decades, and is likely to continue to for quite some time. The computers we all have today are vastly more "valuable" than the computers we had 10 years ago. They do much more. They enable much more. And yet, these newer computers are all almost certainly less expensive than their comparable past offerings. We do not see anyone begrudging that the "value" of computers is declining because, obviously, that would be silly and nonsensical. Price and value are two separate economic variables. They may interact in interesting ways, but people will only purchase a good if the value to them exceeds the price. This is the basic nature of economics. We buy when the value exceeds the price. To argue that a declining price automatically means a decline in value is simply incorrect.

Similarly, Lanier's complaint that a lack of scarcity is the problem is, once again, not supported by reality. What is clear is that for every abundance, new scarcities are created. An abundance of content leads to a scarcity of attention, for example. The challenge for anyone facing a market in which one product shifts from being scarce to being abundant is to find the related scarcities, but Lanier seems to ignore the fact that such a thing is possible.

What matters most is whether we are contributing to a system that will be good for us all in the long term. If you never knew the music business as it was, the loss of what used to be a significant middle-class job pool might not seem important. I will demonstrate, however, that we should perceive an early warning for the rest of us.

It is unclear exactly which "significant middle-class job pool" he is discussing, but as we recently noted, employment in the music and movie business recently reached an all time high.

Copying a musician's music ruins economic dignity. It doesn't necessarily deny the musician any form of income, but it does mean that the musician is restricted to a real-time economic life. That means one gets paid to perform, perhaps, but not paid for music one has recorded in the past.

So much to unpack in this one bizarre paragraph. First, I have no idea what "economic dignity" means. I have not heard the term before, and it seems to have no real meaning. It appears that Lanier is arguing that having to work for a living is some how undignified, which is quite a condescending and elitist statement to everyone else in the world, nearly all of whom work for a living and rely on the fact that they work each and every day to earn money. The vast majority of the world does not get paid for work they did in the past, but the work they do today (though their past work can often influence how much they can get paid today). This actually seems rather dignified to me, but that's a personal perspective. I fail to see how people having to work to earn money is somehow an affront to society.

And, of course, that already assumes that when someone copies music, it means that a musician is "restricted to a real-time economic life." Once again, the actual data refutes Lanier's basic claims. Why Wired would publish something that is factually incorrect -- and easily proven so -- is beyond me. There are plenty of musicians, for example, that disprove this basic claim. Jonathan Coulton is not living a real-time economic life in having to make sure he gets new money everyday, even as he allows fans to copy his music. Neither is Alex Day, or Amanda Palmer or Corey Smith or the long, long, long list of others we can point to who don't mind people copying their music, but have found reasonable ways to make decent (and sometimes quite impressive) sums of money from their fans. Of course, when confronted with this proof that his argument is completely bogus in the past, Lanier's response -- incredibly -- is to state that all of these artists are lying.

It is one thing to sing for your supper occasionally, but to have to do so for every meal forces you into a peasant's dilemma: The peasant's dilemma is that there's no buffer. A musician who is sick or old, or who has a sick kid, cannot perform and cannot earn. A few musicians, a very tiny number indeed, will do well, but even the most successful real-time-only careers can fall apart suddenly because of a spate of bad luck. Real life cannot avoid those spates, so eventually almost everyone living a real-time economic life falls on hard times.

First of all, as we noted above, none of those musicians are singing for their supper at "every meal." They all have very significant buffers. Case in point, Amanda Palmer recently had to cancel a bunch of shows to tend to a friend who had health issues.

However, there is a larger point here, which is this: Lanier seems to imply that in the past, every musician was able to live comfortably off the sales of their music, and none had to work daily to make a living. This is, by any stretch of the imagination, laughable. It was under the old system that only a "very tiny number indeed" were able to do well. And the rest made nothing and were flushed out of the system. What we have today is a system with much more opportunity to build a career, and to control that career. Furthermore, the idea that if you can't perform live, you cannot make money is simply untrue. Look at the example we pointed to of Alex Day above. He doesn't perform live, but has built a very nice career for himself. Artists today are raising money via new methods like Kickstarter that don't require them to tour (though, certainly, some tie their campaigns to touring). The idea that if people are copying your music you can only make money from performance is simply not true.

Meanwhile, some third-party spy service like a social network or search engine will invariably create persistent wealth from the information that is copied, the recordings. A musician living a real-time career, divorced from what used to be commonplace levees like royalties or mechanicals, is still free to pursue reputation and even income (through live gigs, t-shirts, etc.), but no longer wealth. The wealth goes to the central server.

Again, this is an incredible (by which I mean incorrect) rewriting of history. Under the old system, in which there were gatekeepers, the vast majority of the income went to the record labels, and not to the artists. And note that Lanier does not explain why you cannot get "wealth" from other means. He just states it as true. And yet, as we've seen time and time again, many artists who embrace new models have become quite wealthy doing so. And tons of artists trying to make it under the old model did terribly.

Please notice how similar music is to mortgages.

Wait, what?

When a mortgage is leveraged and bundled into complex undisclosed securities by unannounced third parties over a network, then the homeowner suffers a reduced chance at access to wealth.

Let me double down on the "wait, what?" statement from before. Let's be frank here: this is not true. First of all, a mortgage (a liability) is nothing like a song (an asset). When a mortgage is "leveraged and bundled into complex undisclosed securities by unannounced third parties over a network" is has no impact whatsoever on the homeowner's "chance at access to wealth." None. Zip. Zero. Zilch. That's because nothing directly changes for the homeowner. They still have to pay their mortgage. And the mortgage is not an investment in wealth, it's a liability.

The securitization of mortgages is a completely different issues, having to do much more with insurance, which later turned into speculation. But, again, this has nothing whatsoever to do with music, because Lanier seems to be comparing apples to orangutans.

To put it another way, the promise of the homeowner to repay the loan can only be made once, but that promise, and the risk that the loan will not be repaid, can be received innumerable times. Therefore the homeowner will end up paying for that amplified risk, somehow. It will eventually turn into higher taxes (to bail out a financial concern that is "too big to fail"), reduced property values in a neighborhood burdened by stupid mortgages, and reduced access to credit.

Lanier is pointing out the serious issue of systemic risk from an interconnected and overly centralized banking system, combined with crony capitalism that seeks to prop up the system. But, again, that's completely unrelated to anything having to do with music. In fact, if you really wanted to use this analogy, it would likely go in the other direction. Because unlike the banking system, what we've seen in the music industry is a less monolithic, less interconnected, more distributed, more open system that has allowed for greater innovation and value creation spreading out to the nodes, rather than being hoarded in the center.

Access to credit becomes scarce for all but those with the absolute tip-top credit ratings once all the remote recipients of the promise to repay have amplified risk. Even the wealthiest nations can have trouble holding on to top ratings. The world of real people, as opposed to the fantasy of the "sure thing," becomes disreputable to the point that lenders don't want to lend anymore.

I've completely lost track of the analogy here, because there is no actual analogy. I'm guessing that he's now arguing that the labels are the banks, so... are we supposed to be rooting for the banks here? Should we want the record labels to be considered "too big to fail"? The analogy is so confused that we're left wondering who we're rooting for here.

Once you see it, it's so clear.

Clear as mud.

A mortgage is similar to a music file. A securitized mortgage is similar to a pirated music file.

No. They're nothing alike. They're about as unalike as you could possibly imagine.

In either case, no immediate harm was done to the person who once upon a time stood to gain a levee benefit. After all, what has happened is just a setting of bits in someone else’s computer. Nothing but an abstract copy has been created; a silent, small change, far away. In the long term, the real people at the source are harmed, however.

Except, again, that the two situations aren't even close to analogous.

At least in the past, we could argue that Lanier was simply making bad assumptions. But with this piece it's gone beyond bad assumptions into what appears to me to be gobbledygook economics. Making some weird statements that make no sense and have no support or basis in reality, and then declaring a to equal b and the case is closed.

It almost makes me wonder if the whole thing is merely a form of performance art or a sort of practical joke, in which Lanier seeks to see how many people he can fool into actually agreeing with an argument that clearly has no logical thread or real basis. But, as a serious piece of market criticism, it is simply not believable.

Filed Under: jaron lanier

Jaron Lanier's Virtual Reality: Secrecy Is Good Because Secrecy Is Necessary

from the head-in-the-virtual-sand dept

There is now a well-established class of writers about the digital world, whom I fondly dub the Old Curmudgeons. Basically, they agree, things are getting worse all the time -- this modern online nonsense is bad for us and will give us all fallen arches or something. Leading exponents of this view include Nicholas Carr, Andrew Keen and Jaron Lanier.

I think Mr. Lanier is the most interesting of these, because he has a solid technical background and has been creative in the digital sphere for a long time. That makes his Savonarola-like denunciations of the same particularly striking.

Against that background, it was perhaps inevitable that he would weigh in on the Wikileaks business -- and equally inevitable what his line would be, as his title makes clear: "The Hazards of Nerd Supremacy: The Case of WikiLeaks".

If I had several hours to spare, I might try to go through it addressing his various arguments, from those which amount to unsubstantiated assertions about "the ideology that drives a lot of the online world," to ad-hominem sniping (for example, "we didn't necessarily get to know where Mr. Assange was at a given moment" -- maybe because he is doing things a lot of governments and organisations don't like and so discretion is the better part of valour), to outright misapprehension ("Wikileaks isn't really a "wiki," but it is designed to look and feel like the Wikipedia" -- er, well, no actually, it doesn't look like it in the slightest), and to various straw men: "What if we come to be able to read each other's thoughts? Then there would be no thoughts. Your head has to be different from mine if you are to be a person with something to say to me." As far as I am aware, nobody is calling for mandatory telepathy.

But I'd rather examine Lanier's peroration, because I think it exposes the fundamental flaw in his indubitably entertaining essay:

Anarchy and dictatorship are entwined in eternal resonance. One never exists for long without turning to the other, and then back again. The only way out is structure, also known as democracy.

We sanction secretive spheres in order to have our civilian sphere. We furthermore structure democracy so that the secretive spheres are contained and accountable to the civilian sphere, though that's not easy.

There is certainly an ever-present danger of betrayal. Too much power can accrue to those we have sanctioned to hold confidences, and thus we find that keeping a democracy alive is hard, imperfect, and infuriating work.

The flip side of responsibly held secrets, however, is trust. A perfectly open world, without secrets, would be a world without the need for trust, and therefore a world without trust. What a sad sterile place that would be: A perfect world for machines.

What the Wikileaks cables show is precisely that those sanctioned "secretive spheres" are not currently accountable to the civilian sphere. They show all of the shady deals made in backrooms, the outright lies told to the public to keep us quiet, and the connivance with big business to ensure that profit comes before ethics.

Lanier's logic seems to be that everything's fine and the revelations of Wikileaks will only mess things up. And until Wikileaks' revelations, people might have gone along with that analysis, since that was the story that governments were feeding us. But in the wake of Wikileaks, that is simply not a tenable position: as the words of diplomats delineate time and again, everything is not fine and the social pact of accepting those "secretive spheres" in return for a responsible use of the advantage they bring has been broken.

I would love it to be the case that Lanier's analysis were true and in some scaled-up, digitised version of Athenian democracy we could have a responsible wielding of state powers, with secrecy applied wisely and justly. But Wikileaks has confirmed what many have suspected, but have hitherto been unable to prove: that politicians use secrecy to hide their continual and continuing breaches of the trust we placed in them.

Until they change in the light of what Wikileaks is showing, we cannot trust them as we did before. And the more they -- and their defenders, however well intentioned -- deny the situation revealed by their own words through Wikileaks and try to stop us from seeing it, by hook or by crook, the longer that is likely to take and the messier it will be.

And given that proven record of abuse, when they do finally change we will need more transparency about what they are doing -- but not total transparency, which is neither feasible nor necessary -- to make sure that they are not falling back into their bad, old ways under the convenient, comforting cover of secrecy.

Cross posted from Open...

Filed Under: jaron lanier, secrecy, wikileaks
Companies: wikileaks

Jaron Lanier Says That Musicians Using Free To Succeed Are Lying

from the wow dept

Jaron Lanier came out with his book recently, and it's still getting a bunch of publicity, despite getting some rather basic facts wrong. But, even so, I was shocked to hear that he recently stood up at a conference and claimed that musicians who say they are using "free" music to their advantage are lying:

"Every single example of these musicians who did really well by giving stuff away... they don't exist," Lanier says. "There are a lot of people who pretend ... and it is fake."

What a bizarre statement, considering just how many real life examples we see every day of musicians successfully embracing an understanding of basic economics (which Lanier apparently lacks). I was trying to better understand how Lanier could make such an easily debunked statement with a straight face, and it's not clear at all. It appears that Lanier is the one who is pretending here. The only explanation I can find for his bizarre claim is the wiggle room he leaves for himself later in his talk:

Lanier adds that artists making a career off music in the digital age are still having success thanks to the traditional models. "Anyone who is making it now is making it off the little shreds of the old system that is still working," he says.

So, basically, he will try to turn any of the many success stories we regularly talk about into a story about how they're still using "the old system." We've seen this before, and it makes no sense. It's the last gasp argument of someone who's been proven wrong. They'll argue that because someone makes any use at all of the old infrastructure or the old system, every bit of their success is due to that. It's wrong on many different levels.

Furthermore, when Lanier talks about "the little shreds of the old system that is still working," I'm wondering what he's referring to -- given that countless studies are showing that the music business has continued to grow. So, if there's anyone "pretending" here, it seems like it's Lanier.

Filed Under: basic economics, free, jaron lanier, music

Nina Paley vs. Jaron Lanier

from the take-your-pick dept

Okay, so we had said that we were just going to do one post debunking Jaron Lanier's new hatred for everything about "open culture," but WNYC recently had a nice little debate between Nina Paley and Jaron Lanier -- and the thing that amazed me is how unprepared to debate these topics Lanier appears to be. Admittedly, some of it is just that Lanier loses his train of thought a few times, but that's really not what stands out. He rarely seems to have an actual point. You can pretty much sum up his position as "but, artists need to make money and after 10 years, they haven't been able to online, so it's a failure." But that's it. Nothing in what he says explains how to change things. It's just pining for the way things used to be. And whenever he's confronted on specific points, he either falls back to saying "well, I made up that argument originally, but now I know it's wrong" without ever explaining why it's wrong, or saying "well, I'm not an absolutist, so I could maybe see how free could be helpful." His discussion about the length of copyright and whether copyright should go to kids and grandkids is quite telling. He doesn't seem to understand the issues at play, doesn't have a clear train of thought, and goes back and forth and makes totally arbitrary claims, such as, "well, I don't know, I think it's okay to pass it on to your kids, but if it's for your grand kids, okay, I guess I can see that that's starting to be too much." Why? Not clear.

The one point that really does need to be refuted is that he seems to believe that artificial scarcity somehow makes people pay. He talks about the importance of a "social contract" to have people "pay for others' brains." He says "people need to be secure that they're earning their dignity and don't need to sing for their supper every night." But that confuses a few different issues. Having the government step in and ramp up copyright laws doesn't earn anyone their dignity. Providing products that people actually want to pay for does. And that's the point that Lanier seems to miss. He tries to support the importance of "artificial scarcity" by using money as an example, saying that money only works because it's artificially scarce. But that's a total misunderstanding of money. Money works because it's a proxy for value, so it isn't actually artificially scarce at all. It's legitimately scarce, because if you print more money, the value of the money already in the system goes down (inflation) meaning that you have to pay more to get the same thing. It works because it's a proxy for that scarce value. It's not an artificial scarcity at all. He later agrees with Nina when she talks about the importance of real scarcity, but fails to recognize that real scarcity makes sense, whereas artificial scarcity is actually economically limiting.

Lanier also makes an odd claim that the old studio/label system allowed for a "middle class" of content creators. But that's really not true. For most who go through that system it's totally hit or miss, with most missing. But with new business models, we're seeing more and more people who are able to make a perfect middle class living by not having to wait for the gatekeepers. More people are making money due to their music today than ever before, and it's because they have all sorts of different ways to make money.

Nina, not surprisingly, does an excellent job responding to each of Lanier's points. He brings up the inevitable claim that "but people could take your film and do stuff with it!" and she points out that she wants that, and knows that her fans are smart enough to know the difference between her original and what others do with her film.

All in all it's a fun debate to listen to, but I have to admit that I would have found it a lot more interesting if Lanier actually sounded like he understood the topic at hand beyond the superficial level.

Filed Under: copyright, free, jaron lanier, nina paley

Jaron Lanier Gets Old And Crotchety; Maybe He Should Kick Those Kids Off His Virtual Reality Lawn

from the ok-enough dept

Ok. Let's get this out of the way. Jaron Lanier, Wired coverboy of the early years for his virtual reality work (which was often more hype than reality anyway), has written a book. And it's one of those books that helps prove Douglas Adams' famous statement (paraphrased...) that every tech around by the time you're born is "normal," new technology that is invented before you're thirty is cool and new and anything that gets invented after you're thirty is "against the natural order of things and the beginning of the end of civilization as we know it." It's worth pointing out that Lanier turned 30 in 1990, just before the web came about. And, boy, does he hate the web. And the book is all about how much he really hates the web because it's new and different and against the natural order of things and the beginning of the end of civilization as we know it. And since he's Jaron Lanier and since he hates the internet (even though he's published ridiculous essays making these same points that were debunked ages ago), the press is writing about him and have been for the last month or so, meaning that lots of people keep submitting stories, like the recent NY Times article all about Lanier's hatred for the internet.

Honestly, it's difficult to see why it's worthwhile to waste too much time responding to arguments that were debunked ages ago, but just to run through a few of them quickly:

• Lanier falsely believes in the idea of "lock-in" with technology (the claim that the VCR beat Betamax despite being worse and that QWERTY beat Dvorak despite being worse due to "lock-in") is why the internet is so screwed up today. Except, of course the classic examples of lock-in were shown years ago to be false. The VCR beat Betamax because it was better at what people wanted (the ability to record a lot on a single tape). QWERTY is no worse than Dvorak.
• Lanier pulls out Nick Carr's tired and silly claim that people doing user-generated content are "sharecroppers." This ignores that the whole reason they use those sites is that they get value in return. It fails to realize the non-monetary reasons why people use those sites.
• Lanier thinks that the "answer" to file sharing online is to rearchitect the internet for micropayments. Again, this shows a fundamental misunderstanding of both economics and psychology. People hate micropayments and they're incredibly inefficient from an economic standpoint. It also shrinks the market of ideas and holds back communication.
• Lanier argues that the market for "creative people" is shrinking. Apparently he hasn't read any of the recent studies that have shown that every aspect of the music business has grown -- except for the business selling plastic discs.
• Most amusing of all, he argues that "artificial scarcities... allow the economy to function." He even admits that they are artificial scarcities, but still thinks they're a good thing. Again, this seems to be a fundamental misunderstanding of economics. It's hard to talk logically to someone who thinks that having less of a resource is somehow good for the economy.

The list goes on, but at some point it's just not worth bothering with responding point by point. Lanier's trying to sell a book, and it's yet another in a long line of people who don't like the newfangled thing the kids are using because he doesn't understand it. The fact is, it doesn't matter. The internet is a huge success because people actually like the way it works and they get tons of value out of it, even if it's not the value Lanier wanted. No one's going to change the architecture of the internet. No one's going to suddenly figure out a way to make micropayments work where they don't make sense. So consider this my post on Lanier's book, and let's just move on and ignore all the other silly news stories about it, and they'll fade away quickly just like his book.

Filed Under: culture, economics, internet, jaron lanier

Can Silicon Valley Repeal The Laws Of Economics?

from the not-paying-attention dept

The changes we've been seeing in the content industries is driven by some very basic economic forces: competition pushes the price of goods and services toward their marginal cost. There's now lots of competition in markets for information goods, and the marginal cost of producing those items (i.e. distributing a copy of an already-produced song or article) is very close to zero. Therefore, we should expect that over time, the prices of those products would also fall, to the point where the price becomes zero and producers use those information goods as a way to sell other goods. And that's exactly what we've been seeing over the last few years. Newspapers are dropping their paywalls and selling ads. Bloggers are giving away news and commentary as a way of building up their reputations. And we're starting to see musicians give away more of their music as a way to build up a fan base for their concerts. These trends are driven by some pretty fundamental economic forces, and there's not much any one person or industry can do to change them.

But some people are very confused about this. For example, writing in the New York Times, Jaron Lanier tries to blame Silicon Valley for setting the Internet up wrong. He claims that "we" could "design information systems so that people can pay for content." Apparently, Lanier hasn't been paying attention over the last decade. What Lanier is alluding to is micropayments, and micropayments have been tried over and over again. Silicon Valley was only too happy to offer consumers opportunities to pay small amounts of money for content. But it turns out that customers hate micropayments. They're a headache to deal with and they produce very little revenue for content creators. After years of trying to get customers to sign up for micropayments, websites finally discovered that it just works a lot better to give the content away and sell ads.

The other thing Lanier apparently hasn't noticed is that there's already a massive industry devoted to producing content and giving it away in order to sell ads. Last time I checked, a ton of people make a living in the television industry, despite the fact that virtually all the content they produce is given away free of charge. Yet inexplicably, Lanier seems to believe that giving away content and selling ads won't be a viable business model in the Internet age. The problem isn't that ad-supported content isn't viable. The problem is that a lot of incumbent media companies have executed their Internet strategies so ineptly that hardly anyone is visiting their sites. You can't sell very many ads if you've got a tiny audience. The solution is for them to come up with more appealing products (hint: dropping DRM is a good first step), not to once again bang their heads against the brick wall of micropayments.

Filed Under: business models, content, economics, free, jaron lanier, silicon valley