California Makes $50 Million Annually Selling Your DMV Data

from the dysfunction-junction dept

Earlier this year leaked data revealed that the Department of Motor Vehicles in numerous states has spent years selling citizen data to a laundry list of third parties, often without making such financial relationships or data transfers clear to patrons. Some of the data wound up being sold to the usual suspects (auto insurance and credit reporting companies being the most obvious), but much of it is routinely sold to more dubious third-party outfits and private investigators, which fairly obviously poses a risk to folks dealing with stalkers and psychotic exes.

A new report this week revealed that the California DMV alone is making $50 million annually selling this data to a laundry list of companies and third parties:

"In a public record acts request, Motherboard asked the California DMV for the total dollar amounts paid by commercial requesters of data for the past six years. The responsive document shows the total revenue in financial year 2013/14 as $41,562,735, before steadily climbing to $52,048,236 in the financial year 2017/18.

The document doesn't name the commercial requesters, but some specific companies appeared frequently in Motherboard's earlier investigation that looked at DMVs across the country. They included data broker LexisNexis and consumer credit reporting agency Experian. Motherboard also found DMVs sold information to private investigators, including those who are hired to find out if a spouse is cheating. It is unclear if the California DMV has recently sold data to these sorts of entities."

Granted all of this is perfectly legal due to the Driver's Privacy Protection Act (DPPA), a 90's law that critics say is in dire need of an update. That law was created in response to a series of abuses of DMV data, including the 1989 murder of actress Rebecca Schaeffer, after her killer obtained her home address from the DMV. And while the law was intended to stop the abuse of DMV data, it contained (surprise!) plenty of intentional loopholes making it okay to sell this data to a wide variety of individuals, including PIs, bail bondsmen, and consumer credit reporting agencies.

While the data sold can vary from state to state, it generally includes names, addresses, zip codes, dates of birth, phone numbers, and email addresses. Past leaks have shown that the Wisconsin DMV, for example, has personal data sales relationships with more than 3,100 different entities, and that the sale of this data is hugely profitable. California, for its part, insisted that it was doing everything it could to ensure this data isn't abused:

"The DMV takes its obligation to protect personal information very seriously. Information is only released pursuant to legislative direction, and the DMV continues to review its release practices to ensure information is only released to authorized persons/entities and only for authorized purposes. The DMV also audits requesters to ensure proper audit logs are maintained and that employees are trained in the protection of DMV information and anyone having access to this information sign a security document."

But if you hadn't noticed by now, these kinds of promises, be they coming from the DMV or Equifax, haven't been worth all that much. And when and if the data is leaked and abused, the penalties are usually a far cry from the profit made from selling this kind of data in the first place.

Filed Under: california, dmv, privacy, profit, selling information

District Attorneys Have Figured Out How To Turn Criminal Justice Reform Efforts Into Revenue Streams

from the cash,-money,-records dept

Reform efforts targeting cash bail, plea deals, and life-altering criminal charges have occasionally hit on the idea of pre-trial diversion. In exchange for payment and possible an educational class or two, people now have the possibility of satisfying their obligation to the government while keeping their criminal record clean.

It sounds like a good idea. But there's a huge gap between the theory and the practice. In some cases, corporations like Walmart have inserted themselves into the criminal justice system, freeing shoplifters of criminal charges provided suspects pay the store a few hundred dollars and attend mandatory "don't be a criminal" classes. Unlike the government version, there's no chance you'll be found innocent by a jury of your peers. If Walmart accuses you, you pay the fines, do the classroom time, or get hit with criminal charges anyway.

Elsewhere, government agencies are moving forward with pre-trial diversion programs. It makes a limited amount of sense. People don't want to go to jail. And prosecutors don't necessarily want to put in the prosecution work for every rinky-dink case cops toss their way. Yes, there's not a lot of due process in it, but there really isn't much in the system anyway, not when most criminal accusations result in plea deals, rather than jury trials.

These programs could result in positive outcomes for accused citizens, who are able to keep their criminal/driving records spotless despite being cited or arrested for violations. Unfortunately, the programs are being warped to serve prosecutors, rather than the public, as Jessica Pishko reports for Politico.

In Louisiana, the Rapides Parish District Attorney's office asked for $2.5 million in funding from the cash-strapped parish. The treasurer, Bruce Kelly, dug into the DA's numbers to see what had caused this shortfall. Kelly saw a steady decline in the funds collected by the DA's office for court fines and traffic tickets. He also saw an office in good physical condition with a fleet of new cars. None of this added up. So, Kelly dug deeper.

Kelly went through old state audits and other public information, and came to the conclusion that Terrell’s office was bringing in plenty of money but keeping it for itself.

He was right. Under [District Attorney Phillip] Terrell, the DA’s office, as shown by public documents, had ramped up its “pretrial diversion” program, also sometimes called “pretrial intervention,” or PTI. As the website for the Rapides Parish DA’s office explains, the program provides “nonviolent offenders an opportunity to avoid conviction and incarceration” through “tailored” agreements in which the offenders pay money in exchange for their charges being dropped and their cases dismissed. In the program’s simplest form, instead of receiving and paying speeding tickets, offenders were paying fees not to get tickets. And those fees were going directly to the DA’s office—whose website features a prominent MAKE A PAYMENT button.

Ah. So the "diversion" in "pre-trial diversion" refers to the diverting of funds directly from citizens to the DA's pockets. Unlike other areas of the state, diversion fees collected by the Rapides Parish DA go to the DA, rather than a general fund that might make this repurposed reform effort a bit more palatable. But it doesn't, so the first thing you see at the DA's website is a payment button.

This resulted in a lawsuit filed by the parish against the DA's office. The lawsuit contained more details about DA Terrell's personal enrichment scheme.

In 2017, according to the suit, Terrell’s office had brought in $2.2 million through PTI fees—more than 10 times what the previous DA had captured from diversion fees annually—by charging dismissal fees that ran from about $250 for traffic tickets, $500 for misdemeanors and $1,200 to $1,500 for felonies. Those rates were substantially higher than those of the previous district attorney, according to Kelly.

For years, DA's offices have just been leaving this money on the table. Sure, collecting fines and fees is cool, but what's really cool is giving members of the public the dubious opportunity to pay money for fewer due process protections. The DA's office spends less on prosecutions and collects more money -- none of which it has to share with other government agencies.

This isn't just Rapides Parish or Louisiana. It's all over the nation. Whatever the public sector hasn't already stumbled upon, private companies are pitching to prosecutors. It works well enough prosecutors are sort of getting out of the prosecution business. And it may actually help a few people avoid having a momentary, stupid mistake disrupt their futures.

But it's mainly just a cash grab -- one that's more lucrative than over-enforcement and over-zealous prosecution. Government agencies getting shafted by DAs hijacking revenue streams should be angry enough to sue about it. I mean, the public won't necessarily come out ahead, but at least they'll be equally screwed by a number of agencies, rather than a single office with an outsized "MAKE A PAYMENT" button.

Filed Under: criminal justice reform, district attorneys, pre-trial diversion, profit

New Docs Detail How AT&T Planned To Profit Massively By Helping Law Enforcement Spy On The Public

from the privacy-trampling-as-a-business-model dept

Back in 2013 the New York Times profiled just the latest in AT&T-related surveillance scandals, revealing the existence of "Project Hemisphere." The original report detailed how Project Hemisphere is a joint program between AT&T and the DEA that provides a variety of federal and state law enforcement agencies with nearly real-time access to logs and location data on nearly every single call that touches the AT&T network. Unlike AT&T's NSA-related scandals, in many ways this system is much larger than anything covered previously. It's also much older, with the project having roots as far back as 1987.

Making the revelations even more notable was the fact that the report indicated that AT&T had employees embedded with the DEA to help expedite access to this data. This difficulty in trying to determine where the government begins and AT&T ends isn't new; AT&T has long helped the FBI tap dance around privacy and surveillance law, often having its own employees actively working as government intelligence analysts.

But a new report released this week by The Daily Beast indicates that Project Hemisphere is even bigger than originally claimed in the New York Times report. While the Times suggested this project originated as a "partnership" specifically tailored for drug enforcement operations, the outlet obtained AT&T documents (pdf) on Project Hemisphere that make it clear that the project was designed by AT&T from the ground up as a significant money making opportunity. The program also has a notably wider scope than originally reported:

"AT&T’s own documentation—reported here by The Daily Beast for the first time—shows Hemisphere was used far beyond the war on drugs to include everything from investigations of homicide to Medicaid fraud. Hemisphere isn’t a “partnership” but rather a product AT&T developed, marketed, and sold at a cost of millions of dollars per year to taxpayers. No warrant is required to make use of the company’s massive trove of data, according to AT&T documents, only a promise from law enforcement to not disclose Hemisphere if an investigation using it becomes public.

While phone companies like AT&T are in some instances legally obligated to hand over customer data to law enforcement and intelligence agencies, AT&T has a nasty habit of going well, well beyond this, frequently with only a fleeting regard to existing law. Repercussions for this behavior have been minimal to non-existent, with AT&T frequently scoring massive government telecom contracts, and the government itself happy to retroactively change the law whenever its telco partners get into the slightest bit of hot water.

The leaked documents noted that AT&T was notably sensitive to information on this program seeing the light of day, AT&T informing its government BFFs that data collected from Hemisphere should not be used in "any judicial or administrative proceedings unless there is no other available and admissible probative evidence." Since those charged with a crime have the legal right to see the evidence against them, this often results in the government concocting a false investigative narrative to obfuscate the use of programs like hemisphere.

It likely goes without saying, but EFF attorney Adam Schwartz makes it abundantly clear that's not how functioning democracies and legal systems are supposed to work:

"Once AT&T provides a lead through Hemisphere, then investigators use routine police work, like getting a court order for a wiretap or following a suspect around, to provide the same evidence for the purpose of prosecution. This is known as “parallel construction."

“This document here is striking,” Schwartz told The Daily Beast. “I’ve seen documents produced by the government regarding Hemisphere, but this is the first time I’ve seen an AT&T document which requires parallel construction in a service to government. It’s very troubling and not the way law enforcement should work in this country."

Unsurprisingly, efforts by the EFF and others to obtain more detail on Hemisphere using the FOIA have proven fruitless. The only public discourse on the matter is violently superficial, with AT&T, as you might expect, denying it's doing anything remotely wrong:

"Like other communications companies, if a government agency seeks customer call records through a subpoena, court order or other mandatory legal process, we are required by law to provide this non-content information, such as the phone numbers and the date and time of calls,” AT&T’s statement said.

Right, except that's hard to claim when the documents make it clear that AT&T built Hemisphere from the ground up with the express intent of making money off of the government's mammoth, consistently-law-skirting information dragnet. This latest report indicates that law enforcement agencies pay anywhere from $100,000 to upward of $1 million a year or more for access to Hemisphere, netting AT&T a cozy profit for helping government tap dance over, under and around privacy and surveillance law.

Which brings us to this week's news that AT&T intends to spend another $85 billion to acquire Time Warner. This is the same company that not only builds business models based on trampling the legal rights of American citizens, but pioneered new and exciting ways of charging its broadband customers a steep premium for "privacy" on the other end of the equation. What could possibly, possibly go wrong as AT&T attempts to become larger and more powerful than ever before?

Filed Under: dea, drug enforcement, law enforcement, mass surveillance, profit, project hemisphere, surveillance
Companies: at&t

If You're Going To Spread FUD About Evil Cyberlockers, Maybe Don't Use Two Debunked Studies As The Basis?

from the just-saying... dept

The "Washington Legal Foundation" claims to be a legal shop filing lawsuits to protect "free enterprise" and to fight needless government regulation. In the past, the organization has been closely associated with funding from Big Tobacco, and if you look at it's recent litigation efforts, it's almost all in support of Big Pharma and Big Copyright. They helped out on the Aereo case, for example, and sided with Monsanto in its (victorious) case arguing that planting your own seeds can be infringing patents. For a group that claims to be about getting government off your back and supporting free enterprise, it seems somewhat ironic that it appears to so strongly support centralized, government-granted monopolies in the form of copyrights and patents.

Either way, WLF's Glenn Lammi recently wrote a piece for Forbes (which, these days, lets basically anyone with an agenda publish), arguing that cyberlockers are evil because they're all about raking in the big bucks from infringement. The article is sloppy and not particularly well argued, in part because it relies heavily on two recent studies (funded by the industry) that have already been debunked. Lammi ignores that part, because it doesn't fit with his narrative.

You know it's going to be a bad argument when it trots out this classic trope:

“Information wants to be free” is a standard rejoinder to criticism of online entertainment piracy

Except, no, it's not the standard rejoinder. These days, it's mainly used as a strawman by people like Lammi who don't want to deal with actual arguments that are being made. Lammi goes on:

Such a sentiment may motivate some copyright thieves, but profit, not ideology, drives the proprietors of “ cyberlockers” whose business is trafficking pirated entertainment content. A recent study by the Digital Citizens Alliance (DCA)—”Behind the Cyberlocker Door“— has laid bare that reality. These websites generate profit margins that lawful businesses can only dream of, and they do so on the backs of countless workers in the music, movie, and television industries.

Of course, as we've noted for years, if cyberlockers were really so profitable, then shouldn't the response from the entertainment industry be to offer up such services themselves? Lammi, of course, leaves out that the DCA study was commissioned by the industry and that the methodology was so ridiculous that at least one company branded a "piracy haven" has already demanded a retraction of the report and an apology, claiming the report is defamatory. The methodology is clearly bogus. For example, it called Mega.co.nz a piracy haven because the researchers apparently have no idea how it works:

For Mega the researchers looked at 500 files that were shared online. However, the overwhelming majority of Mega’s files, which number more than 500,000,000, are never shared in public.

Unlike some other sites in the report, Mega is a rather traditional cloud hosting provider that’s frequently used for personal backup, through its desktop client or mobile apps for example. The files that are shared in public are the exception here, probably less than one percent of the total.

And yet, DCA's bogus methodology insisted that the majority of files on Mega were infringing. Because they don't even understand how it works. That does not give confidence in the study -- or the fact that WLF is relying on it. Then there's the second study:

A recent KPMG study found that nearly all of the most popular TV shows and movies of the past three years (which are, not surprisingly, also the most pirated), are available through video-on-demand services.

Except, as discussed, that's totally misleading. What the study found was that all of those works were available on at least one of 34 different services. Of course, if you don't use all of those services, you might not be in luck. In fact, buried deep in the report was the more telling stat that if you used the most popular movie/TV service out there, Netflix, less than 20% are available. So, uh, no, contrary to Lammi's attempt to argue that the industry has done it's part, it has not.

A vigorous debate has developed in recent years over numerous aspects of copyright protection. There can be little doubt, however, that cyberlockers are profitably inducing copyright infringement on a massive scale. The discussion should thus not be over whether infringement is occurring, but what measures legitimate businesses can take to deter and stop it.

Actually, there can be plenty of doubt over that claim. Many of those sites rely on advertising, and anyone in the ad business knows that online ad rates are dropping precipitously, and many ad systems rely on clickthroughs. The folks surfing cyberlockers for free movies aren't exactly the kind of folks who click on ads. In fact, a lot of them likely use ad blockers. Yes, some cyberlockers make money from membership fees, but that just shows why the industry should be supporting authorized services like Netflix that provide a better service. And yet they don't.

There are reasonable debates to be had here, but if you're basing your arguments off of debunked studies, don't expect to be taken seriously.

Filed Under: copyright, cyberlockers, fud, glenn lammi, profit
Companies: washington legal foundation

Health Experts Issue Call To Prevent ICANN's Commercialization Of New .health Domain Leading To Exclusive Control Of Online Health Information

from the enough-is-enough dept

Last month, we wrote about a troubling decision by the Internet Corporation for Assigned Names and Numbers (ICANN) to give control over the new .pharmacy domain to big pharma -- thus allowing it to lock out sites around the world that threaten its generous profit margins. An article in the journal "Globalization and Health" warns that something similar could be about to happen in the realm of public health:

In just a few weeks, the Internet could be expanded to include a new .health generic top-level domain name run by a for-profit company with virtually no public health credentials -- unless the international community intervenes immediately. This matters to the future of global public health as the "Health Internet" has begun to emerge as the predominant source of health information for consumers and patients.

The paper, which is open access, and can therefore be read for free in its entirety, gives some hypothetical examples of what could happen:

http://www.[smoking].[health](potentially purchased by a tobacco company)

http://www.[vaccinatekids].[health](potentially purchased by anti-vaccine activists)

http://www.[obesity].[health](potentially purchased by a junk food company)

http://www.[cancer].[doctor](potentially purchased by unscrupulous vendors catering to the desperate dying)

The paper's authors explain:

Despite this increasing use and reliance on online health information that may have inadequate quality or reliability, the Internet Corporation for Assigned Names and Numbers (ICANN) recently announced it intends to move forward with an auction to award the exclusive, 10 year rights to the .health generic top-level domain name. This decision is being made over the protests of the World Medical Association, World Health Organization, and other stakeholders, who have called for a suspension or delay until key questions can be resolved.

ICANN responded to those concerns by asking the International Chamber of Commerce to decide whether a company, rather than a health organization, should be allowed to run the .health domain. No surprise what the outcome was:

a rejection of challenges filed by ICANN’s own independent watchdog and others, such that ICANN's Board decided in June 2014 that there are "no noted objections to move forward" in auctioning the .health generic top-level domain name to the highest bidder before the end of the year.

"No noted objections" if you exclude important chunks of the world's medical community, that is. Or perhaps ICANN simply meant "no noted objections from the companies that stand to gain the most from controlling this lucrative domain". The paper's authors conclude:

we call for an immediate moratorium/suspension of the ICANN award/auction process in order to provide the international public health community time to ensure the proper management and governance of health information online.

In fact, we need to go much further. Rather than simply calling for a moratorium on the auction of these new domains, we should be calling for ICANN itself to be abolished, and replaced with an organization that is concerned with maximizing the global benefits of running the Internet domain system and not, as presently seems the case, with maximizing the profits of a few lucky companies. ICANN has had long enough to show that it is a worthy guardian of this unique and critical resource; it has failed to do so. Time to get rid of it.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: .health, control, health, profit, tlds, top level domains
Companies: icann

Morality, Non-Zero Sum Games, Externalities & Why Someone Profiting Off Of Your Work Isn't A Bad Thing

from the diving-into-the-deep-end dept

In the discussion following my recent post about ex-RIAA boss Hilary Rosen's comments about my article highlighting all of the problems with SOPA and PIPA, Ms. Rosen was kind enough to stop by and attempt to clarify her position:

...my response was "Think analog" not as in analog policy vs digital policy but think of the real world we live in and the ethical issues we face every day. My point was that I can be pissed that the GAP doesn't have an outfit that is as stylish or fit as well as I want. And I can think that they arent serving their customer when they give me ugly clothes that dont fit well. ie: their busiess model sucks. But I don't think that gives me the right to take any of their clothes without paying just because I am an unhappy customer. That was my ONLY point. Do I think that the content industry has moved way too slowly in putting their content online? Absolutely. Do I think they could have been and should be more innovative? of course. But I also know that these are huge ships turning around in creeks and however easy the answers seem to you , they are often really hard. When people screw up their business, their sales go down. That has happened in the entertainment business. They are paying a price for their pace of change. BUT, there is also stealing. Pure old simple unethical stealing. Call it whatever you want - the march of technology - the inevitable cost of innovation, etc. To the writer or songwriter who makes their money on SALES, it is stealing. (Even if they might be thinking about making their money another way.) And while I love the dialog by for and about consumers and fans on these issues, I have no patience for big companies like Google who not only throw huge sums of money out there buying professors and economists and think tanks to kill any effort at copyright protection, they make a fortune on search advertising for those same illegal products.

So, your first sentence was right, I have long been willing to shine an unattractive searchlight at my old compatriots when they deserve it But I have no patience for the finger pointing and nastiness of the so called tech fans in this debate. Thank god I don't have to care so much anymore.

While we appreciate Rosen stopping by and joining in the discussion, the responses highlighted the myriad problems with this statement, going beyond both the tortured, nonsensical analogy (who steals something from a store that doesn't have what they want, or who steals clothes they don't like because they don't like them?) and the ridiculous "it's theft!" claims. If you want to read the full thread or discuss her specific points, I urge you to go to that thread and continue the conversation there.

The whole exchange got me thinking about some bigger issues though. Rosen's comments reminded me so much of my experiences at various recording industry events, where they pay basic lip service to things like "we have to adapt" and "we have to stop blaming customers," but then immediately flips to "but piracy must be stamped out first!" never recognizing that these two things are at odds. And what it boils down to is a mixture of a psychological issue and a confusion over economics.

First, Rosen's response, like many others, falls back on facile and inaccurate "morality" claims. This is usually a sign of a very weak structural framework to an argument. When you can't explain why, you resort to "well, it's just wrong." But, as we've explained for years, the "morality" aspect of an economic decision only comes into play when there's a decision to be made about who will be worse off. That's all morals really are about. If move x harms person y, is it "right" to do that? Folks like Rosen and many SOPA/PIPA supporters see what's happening online and it looks exactly like the previous sentence: "If downloading music harms musicians/songwriters, it's clearly not right to do that."

But that misunderstands the wider economic implications of what's happening. Let's put it another way to make this clear: If selling automobiles harms the makers of buggy whips, is it "right" to do that? I think most everyone would claim that it's fine. This is innovation in process. Thus, the simple statement, "If move x harms person y, that's immoral," seems way too simplistic. Let's expand it out further. What if, in our buggy whip hypothetical, the rise of the automobile forces the buggy whip maker to change their business model... such that they no longer make buggy whips, but steering wheels. The classical lover of buggy whips may find this upsetting -- and the buggy whip maker may complain, "but buggy whips are my product, I'm not in the steering wheel business." But the market doesn't care. In this situation, the morality question is more complex: "If move x harms person y in the short term... but opens up much greater opportunity for them to do better by accessing a much larger market, is it right?" Suddenly, the moral issue is pretty straightforward. There's no moral question at all. The market has changed, and as long as the whip maker comes along for the ride, the opportunity is there to be better off. It may be a challenge, but it's hardly a moral issue.

Rather than confront this, the people who insist this must be a moral issue, back up their claims with a secondary claim to make it seem like a moral issue: "someone else is profiting off my work, and that's unfair." In many cases, the "someone" they point to is "Google." This is mostly a correlation vs. causation error. People see that Google is massively successful, and the timing correlates well with the decline in the record labels. So they assume that Google must be "taking" money from the labels. This is quite inaccurate and shows a lack of knowledge about a variety of subjects, beyond the fact that correlation is not necessarily causation. In the thread with Rosen, I point out that the claims that Google "profits" from infringement are widely overblown. Google makes money from clicks, and infringers aren't hanging around these sites clicking on ads.

But the bigger issue is this relative morality issue of "If someone else benefits from my work without paying, that's unfair." But, again, this is way too simplistic and not reflective of reality. People benefit from the work of others for free all the time. In economics, it's known as an externality. Tragically (and potentially because of the name), people think that externalities are rare. They're not. They happen all the time. Every day, people benefit freely from the work of others without paying. As the saying goes, we all "stand on the shoulder's of giants." So much of what we value today comes from advancements in the past, which we benefit from, without paying those who created them. And yet, no one thinks this is bad.

The real question is if whether you can take it a step further and recognize that the economy is not a zero-sum game, in which one party loses when the other benefits. This is often difficult to understand, but put simply: in a zero-sum market, someone paying you $10 means I lose those $10. In such a scenario it may be reasonable to worry about someone else profiting, because it really does mean you lose. But in a non-zero sum market, with externalities, the market can expand. If every time you get paid $10, I now have the opportunity to make $100, that's clearly a better deal. But, let's make it a little more complex. In the zero sum game, every time you get $10, it's at my expense. But what if the other option in that world is that every time I raise my hand, you get $10 and I get just $1. That's still a much better deal for me to take than the one where I lose money. In this case, I might not make as much as you -- even if I'm doing the work, but is that morally wrong? We're both better off under this scenario. You're better off because you make more money. And I'm better off because I'm making more money... just not as much as you.

But, for whatever reason -- psychology, economic ignorance, etc, -- many people react poorly to this, claiming that it's a moral problem. I, personally, have trouble seeing how a situation in which everyone is better off results in any sort of moral dilemma, since we never reach that crucial moral question of "who gets harmed?" Because no one has to get harmed. But here's the kicker: no one has to get harmed if they adapt. And it's the adaption part that freaks people out and makes them want to cling to something clearer, even if it makes them worse off in the long run.

Filed Under: economics, externalities, morality, non zero sum, profit, zero sum

Can Charity Work With A For-Profit Motive?

from the long-term-vs.-short-term dept

A few weeks back, the always excellent Planet Money podcast played parts of a debate held at the Clinton Global Initiative between famed microfinance guru Muhammad Yunus and successful microfinance entrepreneur Vikram Akula (moderated by Planet Money host Adam Davidson), considering whether or not a for-profit microfinance effort can really work in terms of enabling better financial opportunities for the poor. Yunus argued that a for-profit effort simply cannot do good. Since it has a profit motive and outside investors, its efforts will always be on transferring money away from the poor to those investors.

Akula disagreed, strongly, by pointing out that you can align both of their interests, and his company appears to have successfully done so. In the talk, he gives an example of the fact that they only lend money to women and they charge well-below market interest rates. He also notes that, unlike most banks, they don't pay those in charge of lending the money based on how much money they lend out (or make). The idea there, is that they want the people there to figure out the right amount that the person needs, rather than creating incentives for them to try to get the person to take more, to make their own numbers look good.

Now, he argues that, compared to other banks, you could say that his firm, SKS Microfinance, is leaving money on the table, but he doesn't see it that way. The woman who takes out a small loan and successfully pays it back this time, can come back later, when the timing is appropriate and take out a larger loan, which might never have happened if she had been pushed into a bigger loan earlier, or charged much higher interest rates.

And, while no one specifically says it in the podcast, this is a much bigger point than Yunnus seems to recognize. There are two factors that Yunnus doesn't seem to consider in condemning all for-profit microfinance efforts: (1) this is a non-zero sum game and (2) this is a multi-round game (i.e., there's a long-term strategy horizon). Yunnus is right that for-profit charities probably can't work in a situation that is a zero sum game, or in which the time horizon is very short, such that there are unlikely to be repeat customers. But, just taking a straightforward game theory look at what Akula and SKS are seeing, they can increase the overall pie more efficiently in a for-profit setup. It's not "taking away" from the poor. It's expanding the overall economic pie for everyone, including investors, and part of the way that's done is by focusing on building strong relationships with those using the service. That means, the temptation to screw them over is tempered by the incentives to be fair to encourage that long-term relationship that pays off (for everyone) over the life of the relationship.

I have to admit that I was a bit disappointed in Yunus, who is so often held up as a financial genius for his microfinance theories. As the podcast makes clear, his focus involves heavy government involvement and regulation to create a special type of community-owned microfinance bank, which apparently works okay for the community he's in, in Bangladesh, but that doesn't mean that a for-profit microfinance operation can't help the poor quite a lot, while also helping investors.

Filed Under: business models, charity, muhmmad yunus, profit, vikram akula

Alice In Public Domainland; Just Because Something Is Free And Open Doesn't Mean You Can't Make Money Off Of It

from the thank-you-public-domain dept

Back in December, we wrote about a submission from someone talking about the new Sherlock Holmes movie, and how it was possible because of the public domain. The truth turned out to be more complicated, but perhaps a better (and more accurate) example of the same point is the new Alice in Wonderland film. There have been a bunch of different movies based on the famous Lewis Carroll book, which has been in the public domain for quite some time.

Michael Weinberg does an excellent job highlighting how the various Alices demonstrate that those of us who support a stronger public domain aren't doing so because we think everything "must be free" or, to quote RIAA boss Mitch Bainwol's insulting falsehood, that we're "against those who actually create the intellectual property." Instead, as the various Alices show, the public domain has freed up tremendous creativity, while still allowing content creators to make plenty of money:

Each of these versions are inspired by the original Alice's Adventures in Wonderland. Each was made with commercial motives in mind, not some urge to set information free (and generally made a lot of money for their creators to boot). Each, at least according to the descriptions in the Times, is bizarre. However what is most striking is that each is bizarre in a way that was probably unanticipated by Alice's original author.

Even though they are strikingly different in almost every imaginable way, we can understand them to be related through that original story. Beyond that, they are stronger works because we understand them in the context of a shared cultural touchstone. They aren't all just freaky movies about some girl and a rabbit. They are Alice in Wonderland stories. That changes how we watch them, think about them, and talk about them.

One of the reasons that the creators of these many versions (who, again, didn't do it for free -- they made the movies to make money) felt free to be as strange as they wanted was because they did not need permission to create their version of Alice. They could take the original story, freak it up however they wanted, and create something new. Creators are better off because they had a way to link a new story to something that people understood (and probably made more money in the process). The public is better off because they can choose between a number of freaky Alice in Wonderlands, or even make their own. Even Alice is better off because she lives on as a cartoon, a little girl, a warrior princess, and whatever else people can dream up for her.

And, of course, this is the original story behind so many classic Disney films as well -- but, Disney has too often focused on then locking up the content that it copied from the public domain.

But the point raised here is an important one. No one is saying that everything must be free and open, and that content creators shouldn't make money. Obviously (to most, but not all, apparently) we've been talking about ways to better make money while also encouraging more widespread access and creativity. Getting away from strict copyright protections is not anti-content creator at all. It's very much pro-creativity. And, as we can see from all the new versions of movies about Alice in Wonderland, even Hollywood knows that the public domain doesn't mean no one makes money.

Filed Under: alice in wonderland, free, movies, profit, public domain

The Creator's Dilemma On Others Making Money Off Your Content

from the offer-it-up-yourself dept

A couple of folk sent in this story of Ryan Sohmer, author of the popular web comic Least I Could Do, where he complains about others "stealing" his content in iPhone apps. But, this isn't the usual case of a content creator lashing out about "stealing." Sohmer has built up a nice model in giving away his comics for free, and we even wrote about his anger earlier this year at the Writers Guild of Canada for trying to force ISPs to pay a "tax" to writers. On the whole, his views are quite progressive on business models and free content. But what he's upset about here is that some others are taking his comics and putting them in fee-based iPhone apps, and thus "profiting" off his content, without his permission:

As a general rule, I'm fairly lenient with individuals using our content for personal use. You want to throw up a comic on your blog, use our avatars or wallpapers, that's fine. That's actually what they're there for and truth be told, we appreciate you spreading the word.

Where I draw the line, however, is an individual lifting our entire comic archives, putting them in an iPhone app, charging 99 cents for it and putting their own advertising banners on each comic. Profiting off of our hard work without so much as a link back to this site. No justifying that, that's ripping us off, plain and simple.

The sad reality of it, is that things appear to be getting worse. Almost every day, I receive a couple of e-mails telling me about a new app or aggregator that's featuring Least I Could Do or Looking For Group.

Alex Winston, who was the first to send this in, asked what we thought Sohmer should do in such a situation, and wondered how those who are open to sharing their works should deal with cases where others profit from those works. We've actually discussed something similar recently, but to more directly address the question, I tend to think that the answer is to simply supply a similar offering yourself -- and make it clear which ones are the official versions. Even if you're giving away your content for free, if people want to pay for it, why not offer them a way to do so? And, if you make it quite clear which is the official version and which is not, most people will go for the official version, because they want to support the artist.

And, if you're still offering your works for free, and yet others are making money off of some sort of "aggregation," well, at some point you have to admit that perhaps it's the aggregation they're paying for, rather than the content itself, since they could have received the content for free. I recognize that it can seem upsetting at first if it looks like someone is "making money off of my content," but rather than worry too much about it (since it's not going to go away), the answer is to focus on doing whatever it is you can do to make sure that people know of ways to support you directly, and then it's up to them. If someone else is somehow offering something better, then perhaps look into ways to improve what you offer as well. But, in the end, worrying about what other people do will only get you so far. Focus on what you can do.

An alternative option is that if someone is really doing something that is better with your content, you could approach them, and ask them for a reasonable cut of the revenue, noting that in exchange, you'd promote their app to your fans, as well. That would likely increase the number of buyers, and everyone comes away happy.

Filed Under: copyright, free, profit