Don't Downplay The Importance Of Tweakers In Innovation; Excerpt From 'The Knockoff Economy'

from the tweakonomics dept

Don't forget that tomorrow we'll be running our chat with Andrew Norton about his book No Safe Harbor. However, today we're announcing this month's book club book of the month: The Knockoff Economy: How Imitation Sparks Innovation, which has just been published by Oxford University Press. The authors, Kal Raustiala and Chris Sprigman, will be sharing a series of excerpts from the book over the next few weeks, and then will join us for a chat as well.

In this excerpt from The Knockoff Economy, we want to highlight an important facet of innovation that deserves more attention. Innovators, like innovations, come in different varieties. Consider one major distinction among innovators. Some innovators come up with something radically different from anything that has been done before. These people—the Thomas Edisons of the world—are the kind that we're likely to call to mind when we think about innovation. We will call them “Pioneers.” But the Pioneers aren't alone. There are many innovators who improve ideas and products by refining or reconceptualizing what others have done. This type of innovator adds something new to a familiar way of doing things, improving and refining it. We will call these people “Tweakers.”

Tweakers do not get nearly the attention that Pioneers do. In particular, legal rules about copying are generally focused on the interests of Pioneers. As many observers have noted, IP law often reflects a romantic notion of the lonely Pioneer, toiling away in obscurity while creating a new and great invention. Tweakers, on the other hand, are mostly an afterthought. Yet Tweakers can be very important to the development of successful, effective innovations.

To see how, it's instructive to take a close look at MathWorks, a Natick, Massachusetts, firm that produces software for engineers and scientists. MathWorks has sponsored a series of online programming contests to promote their MATLAB programming language. In these contests, contestants try to write a program that solves a single difficult math problem in the least amount of time. An example is the classic traveling salesman problem, in which contestants compete to find the shortest possible round trip a salesman can make through a given list of cities. Contestants write computer code to calculate the shortest trip, and then submit the code to the MathWorks contest Web site. Their code is graded not only for how closely it approaches the optimal route but also for how quickly it produces the answer.

Contestants can submit as many entries via the MathWorks Web site as they like over a period of several days. Each is scored and the rankings made continually visible to all. At the end of the contest, the winner receives a MathWorks T-shirt and public acknowledgment of his or her victory. That’s it. And for this, quite a few highly skilled people will spend a lot of time—sometimes more than a hundred hours—writing code. A chance at glory within the programming community means a lot.

Yet here’s an even more surprising twist: after a short initial period of “darkness,” where the submitted code is hidden from other participants, the contest is played out in “daylight”—all of the contestants get to see each others’ code. And they not only get to see—they are allowed, indeed encouraged, to take and tweak what they see.

These rules lead to an innovation environment that looks a lot like what we see in many real-world markets. Some contestants are Pioneers—they work out a fundamental insight that helps address the problem and submit code embodying it. Others are Tweakers: they take code from their Pioneer rivals, improve it, and resubmit it.

As more and more Tweakers wring the flaws out of a Pioneer's code, the solutions to the problem get better and better. More subtly, as the Tweakers push any particular Pioneer's solution toward its best implementation, the limitations of the Pioneer's original insight become apparent. In this way, the Tweakers help to prepare the ground for the next Pioneer—someone who comes in with radically different code that avoids the bottleneck that limited the performance of the previous best solution.

OK, you say, so the Tweakers create some value. But doesn't any set of rules that promotes tweaking crush the incentive to be a Pioneer? Why would anyone want to work out a pioneering approach to a math contest problem if a Tweaker can simply take it, fiddle with it a bit, and leap ahead in the contest?

Ned Gulley, the MathWorks guru in charge of the contests, has suggested an answer:

We find that tweaking is the thing our contestants most often complain about, and at the same time it is the feature that keeps them coming back for more. Our discussion boards swirl with questions like this:

• Who deserves the most credit for this code?
• Who is a big contributor and who is “just a tweaker”?
• What is the difference between a significant change and a tweak?

These kinds of questions bedevil real-world software projects. There seems to be a cultural predisposition to find and glorify the (often mythical) breakthroughs of a lone genius. Since this model doesn't always match reality, these questions don't have satisfying answers. Happily, the contest framework acts as a solvent that minimizes this kind of I-did-more-than-you-did bickering and maximizes fruitful collaboration among many parties. . . . Part of this successful formula is the fact that we don't offer valuable prizes to the winners of our contest. The primary reward is social. [B]y way of analogy, suppose Wikipedia contributors were paid large sums of money based on how many of their words persisted in the articles they touched. You can imagine the noise that would result. An enterprise held together by reputation is easily damaged by cash.

The MathWorks experience shows that there is nothing inherently unjust or incentive-destroying about tweaking. Instead, it suggests that people view imitation differently in different contexts, depending on their expectations and the norms of that particular world. Although participants in the MathWorks contests may complain about tweaking, they by and large accept it when they know in advance that it is part of the rules.

Ned Gulley believes that part of the reason Tweakers are accepted in the MathWorks contests is because no real money is at stake. But in football, as we explain in Chapter 4 of The Knockoff Economy [not excerpted here], where big money rides on every game, we also see lots of tweaking. And we also see a surprising amount of information sharing that leads to tweaking. Former University of Michigan head coach Rich Rodriguez, for example, for many years ran summer camps where coaches came to learn his spread-option. And as the New York Times described in 2010, New York Jets head coach Rex Ryan’s off-season training camps have become a Mecca for coaches seeking inspiration:

This is all why, throughout this off-season, springing up like gladiolus along the sidelines of Florham Park, [New Jersey—the Jets’ practice facility], were dozens of coaches in polo shirts and twill slacks, with return airline tickets to Indiana or Hawaii on their hotel bureaus. One week, Jon Gruden, the broadcaster and former Raiders coach, came up from Florida to take the Ryan cure. Then it was Nick Saban of the University of Alabama, college football's defending national champion, reviewing blitzes. “We’re all copycats,” Saban says. “I haven't invented anything in this business. I’ve always watched what Rex does.”

Coaches are free to copy in football. Many do, and copying is considered neither illegal nor immoral. As a consequence, we see hardly any handwringing about it, because it is part of the background culture and people expect great ideas to get imitated. In this way, we see that sometimes the rules don' follow morality, but rather that morality follows the rules. What is normal becomes moral.

There is another example of tweaking so commonplace that we hardly notice it, yet it is central to one of our most vibrant art forms. American copyright law normally forbids the tweaking of creative works unless the creator gives permission. For the last century, however, there has been a different rule for songs—actually, to be precise, for musical compositions, as opposed to recordings of those compositions. This special rule for musical compositions gave birth to what today we know as the cover song. The cover artist must pay something to the original songwriter if she sells recordings of the song. But she doesn’t have to ask permission to cover the song and reinterpret, and tweak it, as she sees fit.

Why does American law contain this unusual exception for cover songs? The story concerns an interesting historical accident. In the early days of copyright, the rules about music were straightforward for a simple reason: at the time, there was no way to record music or to mechanically reproduce it. Music existed on paper (in the form of sheet music) and in the air during live performances. Copyright law prevented—at least in theory—the unauthorized copying of sheet music, which was the only copying possible.

That all changed after the Civil War, with the invention of the player piano. By the 1890s player pianos were widely distributed in the United States. (The phonograph was invented at about the same time and it too was everywhere by the early 20th century.) The player piano deeply troubled popular music composers such as John Philip Sousa. Sousa worried that the pianos would kill the public’s demand for sheet music, and sheet music was the source of composers’ copyright royalties. To make matters worse, the player piano companies refused to pay royalties to composers for the songs they put on player piano rolls. These rolls were scrolls of paper with holes punched out in patterns that instructed the piano how to play a particular song. The rolls, argued the player piano companies, did not “copy” the composers’ musical compositions. As a result, they were perfectly legal.

As Sousa knew, that argument was more than a little disingenuous. Sheet music “copies” a song by rendering it into musical notation—symbols on paper that tell a musician how to reproduce the song. In a similar fashion, a player piano roll “copies” a musical composition by rendering it into a different sort of musical notation—holes punched into paper that tell a machine how to reproduce the song. Sheet music and player piano rolls are essentially the same instructions, just written in different languages. Nonetheless, the Supreme Court, in its 1908 opinion in White-Smith Music Publishing Co. v. Apollo Co., sided with the player piano companies. The Court held that because humans could not read player piano rolls, they were not in fact copies of the musical compositions they encoded. 

The result in White-Smith lasted but a year before it was overturned by Congress. The Copyright Act of 1909 extended the law to cover all “mechanical” reproductions of musical compositions, whether they could be read by human beings or not. With this action, however, Congress mandated that all musical compositions would be subject to what is called a “compulsory license.” In short, since 1909 the copyright law has allowed musicians to copy others’ songs without asking permission, so long as they paid a specified fee to the original songwriter.

Why did Congress create this system of copying? Because they feared the power of the Aeolian Company.

Who? Aeolian is a long-vanished manufacturer of pianos, player pianos, and organs. (Aeolian declared bankruptcy and disappeared in 1985.) But back in the first decade of the 20th century, when player pianos were the hot new technology, Aeolian was a dominant firm—the Microsoft (or perhaps Google) of its day. Anticipating that Congress was about to overturn White-Smith, Aeolian moved swiftly to buy up song rights from musicians and publishing companies so it could copy them onto player piano rolls. Aeolian’s competitors quickly complained to Congress about Aeolian’s attempt to corner the music market. Congress responded with the invention of the cover song rule.

The immediate result was that Aeolian’s competitors gained the right to make their own player piano rolls, so long as they paid the fee. That was Congress’s intent: to keep the Aeolian Company from having a monopoly on the then-crucial player piano roll market. The longer term result was much more significant: because of Aeolian’s dominance of a now-defunct technology, we have a musical culture in America in which musicians are free to tweak songs they like—and they do so with great enthusiasm. Bob Dylan wrote “All Along the Watchtower”; Jimi Hendrix tweaked it into something quite different and, arguably, made a great song even greater. Another 1960’s classic, Van Morrison’s “Gloria,” has been covered by performers including Jimi Hendrix, the Doors, David Bowie, Tom Petty, Bruce Springsteen, Rickie Lee Jones, AC/DC, and Patti Smith, in perhaps the song’s most memorable and inventive reinterpretation. “Gloria” is an enduring song in part because so many legendary musicians have tweaked it. Cat Power, John Lennon, Willie Nelson, Paul Anka, and many other famous artists have issued albums of nothing but cover songs. All this (legal) tweaking has made our musical culture immeasurably richer.

But has the freedom to tweak others’ songs, in exchange for a very low fee that the original songwriter has no power to override, suppressed the incentive to write new songs? There’s no evidence of that. Indeed, every day we see a continual outpouring of new musical compositions. Tweakers and Pioneers co-exist comfortably in the world of music. It is sometimes hard to tell them apart, in fact. Think for a moment about jazz greats like Charlie Parker and John Coltrane. On one level, they are Tweakers—Coltrane’s version of the Rogers and Hammerstein standard “My Favorite Things” recognizably appropriates that song’s famous melody. But if Coltrane starts there, it’s certainly not where he ends up. By the song’s end more than 13 minutes later, Coltrane has tweaked the original melody and taken it in a much darker, more contemplative direction. At some point in the song, Coltrane crosses the uncertain border that separates Tweakers from Pioneers.

In sum, tweaking is not just something done by football coaches or software engineers. Tweaking is present in all inventive fields, and in some—like music—is a very prominent part of the creative process. Perhaps the most important point about tweaking is this: tweaking does not appear to suppress pioneering innovation very much. If anything, it may often encourage it. Many of the most significant and enduring innovations rest on tweaking. As Malcolm Gladwell has argued, the late Steve Jobs of Apple—an icon of our innovation economy if there ever was one, and the man behind the iPhone and iPad—“was repeatedly referred to as a large-scale visionary and inventor.” But in fact, “he was much more a tweaker.”

Steve Jobs, Gladwell goes on to argue, was “the greatest tweaker of his generation.” Even the iPad, Jobs’ last great success, was a tweak of an idea out of Microsoft. And Gladwell rightly points out that the significance of tweaking to technological innovation is by no means just a New-Economy thing: economists debating the origins of the industrial revolution have claimed that the key reason Britain, and not France or Germany, was the first home of the industrial age was tweaking. As Gladwell describes their argument, Britain was not necessarily the home of pathbreaking Pioneers who created the foundational building blocks of the industrial revolution. Rather,

Britain dominated the industrial revolution because it had a far larger population of skilled engineers and artisans than its competitors: resourceful and creative men who took the signature inventions of the industrial age and tweaked them—refined and perfected them, and made them work.

Filed Under: innovation, knockoff economy, tweaking

Why Open Doesn't Conflict With Money... But Often Appears To

from the it's-all-about-the-size-of-the-pies dept

Venture capitalist Fred Wilson has a typically insightful post discussing the question of whether or not being "open" conflicts with making money, building off a post by Mathew Ingram about his love/hate relationship with Twitter in which he notes:

Lastly, I hate that Twitter’s metamorphosis seems to reinforce the idea that being an open network — one that allows the easy distribution of content across different platforms, the way that blogging and email networks do –isn’t possible, or at least can’t become a worthwhile business.

Fred is a well known believer in "open" projects and has quite literally put an awful lot of money into a variety of startups that espouse a very open philosophy. So it's not surprising that he disagrees that it's not possible to make money and be open. But his view is nuanced:

I do not think open conflicts with making money and further I think there are ways to make more money by being open rather than closed, but it takes imagination and a well designed relationship between your product/service and the rest of the Internet.

I also think it is better to open up slowly, cautiously, and carefully rather than start out wide open and then close up every time an existential threat appears on the horizon.

He points to Etsy as an example of a company that has become more open over time, and to Twitter as one that started out very open and has had to close up over time (Fred is an early investor in both companies). At the end of his post, Fred tosses in an aside to the "O'Reilly Doctrine" referring to one of Tim O'Reilly's (many) great maxims:

Create more value than you capture

I've actually been thinking about this quite a bit lately, and I think that when you recognize how growing markets tend to work, and the way openness can influence markets, that the O'Reilly Doctrine explains -- in a backdoor way -- why it appears that open platforms are antithetical to making money, when the truth is often quite the opposite. I've been trying to explain this (unsuccessfully) for years, but hopefully I can express it more clearly here.

Economic growth comes from the sharing of ideas (once you get past growth through scarce resource discovery). This is the key realization of a number of economists over the past few decades, most notably, Paul Romer. As we've noted in the past, knowlege is a universal resource that does not diminish and can expand -- unlike scarce resources that are limited. Knowledge and information only expand, and in doing so they often make all of those other scarce resources more valuable. Knowledge and information makes things more efficient and makes things better, thereby increasing economic value and expanding the overall pie. Or, as Romer has said:

Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. Human history teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material.

Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. The difficulty is the same one we have with compounding. Possibilities do not add up. They multiply.

Possibilities do not add up. They multiply. But take that a step further. One of the ways to increase this kind of growth and to increase this kind of knowledge sharing is to be open and to allow everyone (or larger groups of people) to contribute. And that requires openness. But there's a related caveat to that. When you're open like that and allowing others to contribute, you're also "leaking" some of the benefits as well -- often a very large amount. In economic terms, these are often referred to as positive externalities or spillovers. Basically things that one party does that benefit others widely. I think both terms are slightly misleading in that when most people think about externalities or spillovers, they assume a small bit off the top.

But when it comes to knowledge and information in open systems, it's not that way at all. The vast majority of the benefit is actually going back to the public, because you don't have the walls and the gates to contain it and capture all that value directly. But that doesn't mean there isn't a tremendous amount of value that can be captured by those responsible for creating the open systems. It's just that on a percentage basis, it seems much less. They create these massive and expansive fields of value out of nothing, and only capture a small piece of it -- leaving the rest of those benefits to be enjoyed by the public. But these fields are so big that the businesses themselves can be huge and can make a ton of money (think: Google, Twitter, Craigslist, Kickstarter, etc...).

Yet, in the old, closed way of doing business, the mentality is very much about how much of the value did you capture. They're not concerned about expanding the overall market and just keeping a small part. They're focused on capturing a larger and larger piece of the existing market. It's why, for example, with the entertainment industry, we see them so focused on taking bigger and bigger licensing deals, and making it so businesses like Netflix and Pandora and Hulu have trouble building long term viable businesses -- because the old gatekeepers look at them and say they're benefiting too much from the value we created -- and we need to take our "fair share." The open systems look at the absolute amount of money they're making, and say "wow, by creating so much more value, and just taking our sliver of the proceeds, we're doing great!"

It's a completely different view of the world.

But, from the outside looking in, if you view the two using the same "metrics" as the old, closed systems, the new "open" ones don't appear to make as much money. But it's not that they can't or don't make a lot of money. They do. It's just that they make less as a percentage of the value they create. And while it's the absolute number that really matters, it seems that our brains are sometimes hardwired to focus on the relative value capture.

Open systems can and do make lots and lots of money. As Fred notes, it requires a lot more thought and planning in terms of figuring out where and how (and often it requires a much closer relationship between products/services and users). But often, looking at the wider market, it feels like those businesses must be leaving more money on the table because they capture a relatively smaller portion of those markets, even if the dollar amounts may be bigger in real terms.

In the simplest of traditional terms: it's better to capture a small slice of a massive pie then a large slice of a small (and shrinking) pie. And being open is how you grow the pie -- not incrementally or linearly, but exponentially.

Filed Under: business models, economics, externalities, innovation, open, spillovers

High Tech Jobs Are Important, Growing... And Everywhere

from the this-is-important dept

A new presentation from the Bay Area Council Economic Institute combined with a data visualization from Engine (disclosure: I'm on the steering committee for Engine, though I had absolutely nothing to do with this project and only found out about it after it was done) looks at the nature of high tech jobs in the US today -- and it shows just how important innovation and tech jobs are to the economy. Even as we've gone through difficult economic times, high tech jobs have continually and significantly outpaced growth of the rest of the private sector: Perhaps more importantly, it shows that high tech jobs aren't just concentrated in a few key areas, like Silicon Valley, New York, Boston and Seattle -- but really are found pretty much all across the country: And, in fact, the presentation highlighted some unexpected areas of the country showing very large high tech growth in just the past few years: A lot of the places on that list above aren't areas that you'd consider to be "tech hubs." Now, of course, that last slide is just showing percentage growth, so if a place is starting from a small number, that growth percentage could be somewhat distorted. But when looking at the whole of the data, it certainly seems to suggest that high tech job growth is happening across the country -- and that's a good thing.

The problem, of course, is that it often seems like the high tech industry is ignored in Congress in favor of some other industries that have a much longer history of lobbying. But if the federal government is serious about claiming that job growth is the key to our economy, then it really needs to start paying attention to these facts, and recognize that the tech industry is not just limited to Silicon Valley, and is creating jobs across the country. That shouldn't be surprising of course, since we live in a digital age, and all sorts of jobs are quickly becoming tech jobs. But it does mean that we need policies in place that allow this kind of shift to continue happening, rather than stifling it with legacy policies that just protect old and obsolete businesses who fail to adapt.

If you'd like to play around with some of the data in an interactive format, the folks at Engine have set up a neat interactive map to dig into where the high tech jobs are located in the US today, even letting you look back at how it's changed over the past decade.

Filed Under: growth, high tech jobs, innovation, jobs

Forget The Death-Star Anti-Mosquito Lasers, Here's How Nathan Myhrvold Can Help Tackle Malaria -- And Improve His Image

from the really-doing-good dept

Nathan Myhrvold is trying to rustle up a little positive PR for Intellectual Ventures (IV) by appointing a VP of Global Good (although it's hard to see how anyone lumbered with such a daft job title is going to be taken seriously anywhere.) You can gauge just how touchy Myhrvold is on this topic by his rather waspish response to some commentary on that move.

As Techdirt reported, Myhrvold came up with what he obviously thinks is a winning riposte whenever people criticize IV's business model based on industrial-scale patent trollery. He asks them: "How big is your malaria project?" His point being that IV does does have a malaria project, so this somehow makes up for all the bad stuff it does. There's only one slight problem: that project offers little more than fantasy solutions. For example, here are some details from Intellectual Ventures Lab's malaria page about a cool-sounding "photonic fence" designed to keep out mosquitoes:

The system would create a virtual fence made out of light -- we call it a "Photonic Fence". Light Emitting Diode (LED) lamps on each fence post would beam infrared light at adjacent fence posts up to 100 feet (30 meters) away; the light would then hit strips of retroreflective material (similar to that used on highway signs) and bounce straight back toward the illuminator. A camera on each fence post monitors the reflected light for shadows cast by a hapless insect flying through the vertical plane of light.

When an invading insect is detected, our software identifies it by training a nonlethal laser beam on the bug and using that illumination to estimate the insect's size and also to measure how fast its wings are beating. Using this method, the system can not only distinguish among mosquitoes, butterflies, and bumblebees, but it can even determine whether a mosquito is male or female! (Females are significantly larger than males and have slower wingbeats.) This is useful because only female mosquitoes bite humans.

However impressive all that technology might be, there's the obvious problem that mosquitoes could just fly over these "photonic fences". Perhaps conscious of this flaw, the page describes several other equally ingenious -- and equally impractical -- approaches to tackling malaria including the use of magnets to make mosquitoes explode and an "engineered blood substitute" to draw them away from humans (also useful for regions plagued by vampires, presumably.)

This impracticality rather undermines Myhrvold's taunting of lesser mortals that don't have their own malaria project, since his lab projects seem unlikely to make any significant contribution to combatting malaria in the short term, if ever. Clearly, to tackle malaria in real-life situations, what is needed is not some super high-tech approach that looks good in TED talks, but something rather more simple and effective -- something like this, perhaps:

The University of Cape Town’s Science Department believes that it has found a single dose cure for Malaria.

This was announced by researchers that have been working on this compound, from the aminopyridine class, for several years. Unlike conventional multidrug malaria treatments that the malaria parasite has become resistant to, Professor Kelly Chibale and his colleagues now believe that they have discovered a drug that over 18 months of trials "killed these resistant parasites instantly".

Unlike potentially blinding lasers, the new compound is claimed to be safe, with no adverse side effects. Of course, lots of clinical tests still need to be run to establish that and its efficacity. Then, a way to manufacture and distribute the drug to malaria victims will need to be found. The worry has to be that traditional drug companies won't be interested in helping here, since the drug must be sold cheaply if it is to reach the millions of people most affected by malaria, and that means few if any profits -- not something pharma companies are happy with.

So here's a suggestion. If Myhrvold really wants to burnish the image of Intellectual Ventures through philanthropic activities, he should forget about appointing his VP of Global Good, and drop his fun but useless malaria program. Instead, he and his company should offer to pay all the costs for carrying out the clinical tests of this new anti-malarial drug, and for setting up a large-scale manufacturing program sufficient to treat everyone in the world that has the disease, or is at risk from it. Helping to circumvent problems caused by drug companies' obsession with patents and exorbitant profits would be a truly fitting way to atone for the sins of Intellectual Ventures.

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

Filed Under: drugs, malaria, mosquitoes, patents
Companies: intellectual ventures

Some Thoughts On An Innovation Agenda

from the transparency-and-openness dept

Over the past few weeks we've been running this little experiment with Darrell West of the Governance Studies program of the Brookings Institution to crowdsource ideas, feedback and insights into how the federal government can go about promoting an innovation economy. I wanted to use this Labor Day "off-day" to highlight some of what the experiment showed.

• West provided us with an initial list of 96 items, and many of you added additional items as well. There were a wide variety of ideas, many of which generated interesting discussions.


• While we had wondered if the original 96 ideas would "crowd out" any new suggestions, in actuality the second highest ranked suggestion didn't come from West, but from a user, Josh Remer. Also a user-suggested item for putting in place an independent inventor defense for patents ended up pretty high up on the list, though that may be a function of Techdirt discussing that suggestion frequently.


• Education and learning topped the list. The top three items as per your voting, in order, were:
  1. Have educational resources developed with taxpayer dollars be licensed under creative commons license
  2. Encourage classes in critical thinking, analysis, statistics, and financial literacy in K-12 schools.
  3. Encourage more open access to data collected through federal grant dollars
  It appears that more open information in education, as well as better, more practical education programs were what had people most interested.


• The next two items were really focused on government transparency:
  1. Ensure that local, state, and federal government procurement processes are fair, open, and transparent
  2. Improve transparency by publicizing government requests to remove Internet content, censor usage, or subpoena information
  It seems that greater transparency from government is definitely up there on the list of what people would like to see -- though some questioned what that has to do directly with innovation. I can see the thread that connects them, though. A more open government can help incentivize or enable greater innovation, while also limiting things that can become chilling effects on innovation.


• The topic with the biggest splits (i.e., largest numbers of both "for" and "against" votes) all had to do with broadband. I find this to be interesting, because, in general it seems uncontroversial that increasing the amount of broadband available can and should be a boon for innovation. However, I think that the concern comes in from what the government's role should be there... and the fear that they'd only serve to make things worse (a decent possibility). In some ways, I'm afraid this highlights some of the problems that we do see in broadband policy today. Whether we like it or not, there are regulations on that market, and saying "no regulation" doesn't change the status quo that it is somewhat regulated. I also think that, unfortunately, issues related to "broadband" have been tainted with partisan fighting, thanks to the way things eventually came to rest in the net neutrality fight (which hadn't been partisan at all... until suddenly it was).


• The bottom three results, were all about expanding government programs in some manner or another (all three of them started with the word "Increase.") General distrust of the government? Or just a general feeling of keeping government size in check? Perhaps.


• A lot of the conversations were quite interesting. One of the more common complaints was that many of the items were "too vague." That said, I think there's still value in having a discussion around vague ideas before narrowing in on more specific ones. The goal of this exercise wasn't to zero in on a definitive and specific agenda, but to find out what issues, in general, were of most interest. Still, I can see where vagueness potentially made it more difficult for people to vote on items since it wasn't entirely clear what they'd be supporting (i.e., whether it was just "a good idea" or a "good program to achieve a specific idea.")


• There were some concerns about whether or not some of the items really had much (if anything) to do with innovation. It seemed clear that some were a lot more direct than others in terms of their impact on innovation, but personally I think there's value in having more ideas on the list, rather than fewer, in the interest of exposing a wide variety of ideas, even if not all of them were fully fleshed out in the single sentence descriptions.


• It was great to see widespread participation in the discussion. Nearly 200 comments were generated, creating some thoughtful and enlightening discussions. It was nice to see people like AOL founder Steve Case and writer Doug Rushkoff show up in the comments, along with many of you from the wider Techdirt community.

All in all it's been great to see how the process played out. Thanks so much to everyone who participated. We'll be back tomorrow, with our regularly scheduled programming...

Filed Under: brookings institution, education, innovation agenda

How Copyright Has Driven Online Streaming Innovators Insane

from the insanity-defense dept

A little over four years ago, we wrote about the Second Circuit appeals court's ruling in the case over the legality of Cablevision's remote DVR. As we said at the time, the court came to the right result -- the remote DVR was perfectly legal -- but had to twist itself into all sorts of crazy contortions to make that argument fit within the confines of copyright law. That's because of the nature of copyright law itself, which is almost always reactive to technological changes and, because of that, always gets twisted up when important, useful and disruptive innovations come along. As we noted four years ago, copyright law "is simply not set up" to handle something like a remote DVR. Even though a home DVR is clearly legal, and the only real difference between one at home and one in the cloud is the length of the cord between the DVR and the TV, the legal arguments to make them both legal are quite twisted.

Since then, we've seen a whole bunch of startups try to offer variations of streaming video online -- often relying on that quite twisted ruling in Cablevision. Each time we write about them -- companies like ivi, Zediva and Aereo -- we tend to note that all of them are doing incredibly inefficient and convoluted things on the back-end to try to stay within the confines of the law, as established by the Cablevision ruling. But to any objective observer considering what makes the most sense for a company and its users, all of the Rube Goldbergian designs of these companies seem entirely pointless. The goal is the same: to reasonably offer streaming services that match what people can do at home with a DVR or a DVD player -- but it has to be twisted to make that work within the whacked out language of the law.

And that's because the law is never written with innovation in mind. Quite the opposite. The history of copyright law is that every time something new comes along, Congress duct tapes on some new "right" to make it work. The 1909 Copyright Act was driven by the scary, scary invention of the player piano, which was going to wipe out the sheet music business or something. But the internet mucks with all of that -- in part by bringing together different roles that had previously been separate. The end result is that different aspects of copyright law may or may not apply, depending on where you sit.

Law professor James Grimmelmann has picked up on this and written an absolutely brilliant piece over at Ars Technica, where he dives into the nitty gritty details of all of this to explain how copyright law for streaming went insane. Here's the opening:

Suppose I could offer you a choice of two technologies for watching TV online. Behind Door Number One sits a free-to-watch service that uses off-the-shelf technology and that buffers just enough of each show to put the live stream on the Internet. Behind Door Number Two lies a subscription service that requires custom-designed hardware and makes dozens of copies of each show. Which sounds easier to build—and to use? More importantly, which is more likely to be legal?

If you went with Door Number One, then you are a sane person, untainted by the depravity of modern copyright law. But you are also wrong. The company behind Door Number One, iCraveTV, was enjoined out of existence a decade ago. The company behind Door Number Two, Aereo, just survived its first round in court and is still going strong.

The whole piece is totally worth reading. But it keeps going back to the same thing. Thanks to a combination of ridiculously antiquated copyright law and the 2nd Circuit's right result-but-for-odd-reasons ruling in the Cablevision case, we have a ridiculous setup where no one ever seems to take into account just what's happening for the end user, but rather focuses on the back-end to either jump through silly hoops (if you believe these services are legal) or to find questionable loopholes (if you're a copyright maximalist) to try to show that your service is legal. The end result is not only very bizarre, convoluted and inefficient systems that make no sense, and which no sane person would choose to set up as a business, but also one where we just see an ongoing stream of wasteful legal battles.

In talking about Zediva -- the company that set up individual DVD players in a data center which could stream only a single copy of an actual DVD playing at a time to a single user -- Grimmelmann again notes that none of this makes any sense:

And once again, it's a business model that would not exist in a world with copyright policy that was not demonstrably insane. Rapidly spinning optical discs make sense as a distribution technology because they're compact and durable. But they're a hassle and a half for playback, because they scratch, skip, and make random access a pain. If you're going to use the Internet for distribution, better to take the DVDs out of the picture and use them as coasters. But since Cablevision had opened up what seemed like a gap in copyright law, Zediva poured shiny lacquered discs into the breach.

Is there a way out of this that doesn't necessarily require a total dismantling of copyright law? Grimmelmann suggests that the more common sense (i.e., not insane) approach would be to actually look at what the end-user experience is:

Perhaps we can think about the problem of copyright on the Internet another way. Instead of asking which back-end technologies are legal, it might make more sense to ask what it is legal for users to do with computers on the front end. This approach would let people spend less time worrying about the exact definitions of "reproduction" and "performance" and more time thinking about users' rights, especially under fair use.

Cablevision itself illustrates what might have been. The whole point of the RS-DVR was that it was a perfect substitute for a home DVR. Reasoning by analogy, then, we might say that the two ought to either both be legal or both be illegal. And since home DVRs seem here to stay, it ought to be permissible for Cablevision to offer its customers exactly the same service they could have gotten by buying a gizmo. Call it "noninfringing personal fair use" and we can all go home.

Unfortunately, he notes that such a result wasn't possible in the Cablevision case, because Cablevision itself chose not to litigate the fair use issue in its case. End result? More insanity.

Of course, even Grimmelmann's solution potentially leads to some other issues, as well. For example, we've long argued that an embedded video on a website isn't infringing because it's no different than a link -- and that if there's infringement, it's from the uploader or hosting provider, rather than the intermediary who posted the embed code. But under Grimmelmann's "end user" analysis, then anyone who embeds could be liable as well, as to the end user, it wouldn't appear any different than a site that hosted the content. That raises some difficult questions as well.

But there's a reason for that: because these laws were designed for a very different era and very different technology. The concept of an open internet, and even something like an "embed code" is completely foreign to copyright law, meaning that it's legality is very much in the eye of the beholder. And really, that just serves to highlight the real problem here: copyright law isn't built for modern technology, and that's creating all sorts of problems for innovative services.

Either way, Grimmelmann's whole article is absolutely worth reading, so go check it out, even if it may make you bang your head repeatedly at the pure insanity of the situation we're in today.

Filed Under: copyright, insanity, streaming
Companies: aereo, cablevision, ivi, zediva

Made In America: Foreign Entrepreneurs Who Will Compete Against Us

from the good-to-see dept

While I enjoy reading The New Yorker when I get the chance, it's rare they cover an issue that I'm deeply familiar with. So it's great to see James Surowiecki jump into the pool with an article about the problems with the US's view towards skilled immigration. It's an issue we've been covering for years, and I still can't figure out why people are against opening our shores to skilled immigrants. It often seems like the arguments against it are a mix of just under the surface racism with a healthy dose of ignorance about economics. Skilled immigrants help expand the pie, creating new companies and new jobs, rather than taking away from the market, as some falsely assume.

The Surowiecki piece is a good one in debunking many of those arguments and highlighting why we really need reform to let in skilled immigrants -- because as we keep turning them away, plenty of other countries have been welcoming them with open arms, meaning that they'll be building businesses that compete with domestic companies, rather than building companies in the US. And, even worse, a large number of those that we're turning away are people who were schooled here. So we're building our own competitors -- who want to stay here and help our economy -- and then sending them elsewhere to compete with us. How does that make any sense at all?

Of course, with unemployment here above eight per cent, too little immigration may not seem like a bad thing: surely we need more jobs, not more workers? But this is a shortsighted view. Economies are not static, with a limited set of resources to go around. As the work of the economist Paul Romer has shown, economies grow faster when there is more innovation, and having more smart people in the workforce is a key driver of innovation. And the quickest, cheapest way to get more smart people is to make it easy for them to move here. What’s more, historically there has been a clear connection between immigration in the U.S. and entrepreneurship, with immigrants creating companies (and jobs) at a disproportionate rate. In one famous study, the social scientist AnnaLee Saxenian showed that Chinese and Indian immigrants alone founded a quarter of Silicon Valley start-ups between 1980 and 1998, while a 2007 study found that a quarter of all technology and engineering start-ups between 1995 and 2005 were founded by immigrants. On a larger scale, more than forty per cent of the companies in the 2010 Fortune 500 were started by immigrants or their children.

Of course, the piece also explains why various bills to fix this (even with bipartisan support) don't seem to be moving: "there is no urgency in Washington on the issue, and voter anxiety about the weak economy and the scarcity of jobs gives politicians an excuse for inaction." Basically, some fear mongering among those who don't like "foreigners" during an election season is holding back good and useful policy, much to our own detriment.

Filed Under: entrepreneurs, immigration, immigration policy, skilled immigrants

DailyDirt: One Small Step For A Man...

from the urls-we-dig-up dept

Neil Armstrong's recent passing has reminded lots of folks about the first manned mission to the moon. The whole idea that "we could put a man on the moon" seemed incredible in the 1960's, and the feat is still remarkably difficult -- even if kids today can't fully appreciate the accomplishment. Maybe someday, we'll go back to the moon (and this XKCD will have to be adjusted), but in the meantime, here are just a few links about that historic first moonwalk.

• Neil Armstrong's first words as he stepped on the moon were slightly misheard by everyone on Earth, and audio analysis of the recordings suggests that Armstrong didn't just mis-speak. "That's one small step for *A* man, one giant leap for mankind." [url]
• In 2006, NASA realized that it had lost its original Apollo 11 moon landing videos, but fortunately, archived footage of the moonwalk was found in Australia in 2010. The tapes were restored and digitized -- and hopefully we won't lose them again when nobody remembers what MP4 is. [url]
• President Nixon was prepared for an Apollo 11 disaster with a speech that he thankfully never read to the American public. The "moon disaster" speech is a creepy reminder that space exploration is an inherently risky venture... [url] [page2]

If you'd like to read more awesome and interesting stuff, check out this unrelated (but not entirely random!) Techdirt post.

Filed Under: apollo 11, exploration, moon, moonwalk, neil armstrong, nixon, space
Companies: nasa

Court Says You Can't Innovate If It Would Negatively Impact NBC's Business Model

from the of-course-not dept

While there's been a fair amount of focus lately on the legal status of Aereo, the company offering broadcast TV over the internet by setting up a bunch of individual antennas and letting people access them online, there's also the ivi case. ivi, if you don't remember, offered what sounds like a very similar service to stream broadcast TV over the internet (for a fee). However, it used a completely different legal theory, believing it had found something of a loophole in the Copyright Act; namely Section 111 which allows cable providers to rebroadcast content for a compulsory payment to the Copyright Office.

The district court was not impressed, and basically said that ivi was trying to do an impressive tapdance -- defining itself as a cable provider to be able to use Section 111, but then claiming it was not a cable provider under the Communications Act. On appeal, ivi has lost again (pdf and embedded below), as the appeals court went a simpler route, and pointed out that reading the legislative history of Section 111 makes it clear that it was not intended to be used by services over the internet.

While I had bounced around on this earlier, I actually think that the court is probably right here, in terms of what Congress' intent was.

There still are some troubling parts to the ruling, mainly concerning purely faith-based claims by Judge Denny Chin that a service like ivi creates irreparable harm to the TV networks. Chin specifically claims that if ivi streams the videos online it hurts the networks:

First, ivi's live retransmissions of plaintiffs' copyrighted programming over the Internet would substantially diminish the value of the programming.

I don't see how that's true at all -- and it's certainly not obviously true. In fact, it could increase the value of the programming by making it easier and more convenient for more people to watch. Judge Chin tries to back up this statement by arguing that because the TV guys often sell ads targeted at specific segments and times, this could mess with that:

Plaintiffs broadcast their copyrighted programming to various communities at different scheduled times, for example, based on time zone or local network provider. For this reason, negotiated Internet retransmissions -- for example, on Hulu.com -- typically delay Internet broadcasts as not to disrupt plaintiffs' broadcast distribution models, reduce the live broadcast audience, or divert the live broadcast audience to the Internet.

If ivi were allowed to continue retransmitting plaintiffs' programming live, nationally (and arguably, internationally), over the Internet, and without plaintiffs' consent, ivi could make plaintiffs' programming available earlier in certain time zones than scheduled by the programs' copyright holders or paying retransmission rights holders. ivi's retransmissions of plaintiffs' copyrighted programming without their consent thus would devalue the programming by reducing its "live" value and undermining existing and prospective retransmission fees, negotiations, and agreements. ivi's retransmissions would dilute plaintiffs' programming and their control over their product.

But... that makes no sense. If that's true, then one could just as easily make the same argument about VCRs or DVRs. Yes, they disrupt the "traditional" way that a certain industry's business model works, but that doesn't necessarily mean that it's automatically diminishing the value of the original. After all, the TV guys made the same arguments about both VCRs and DVRs and now most of them admit that the DVR has actually helped their business by increasing the value of shows by making them more easily watchable by people. There's no reason to think the same thing wouldn't be true here.

In the end, as we argued from the beginning, the situation with ivi and Aereo (and Zediva and others) is silly. They're all looking for loopholes in the law to do what should clearly be allowed anyway. But because of the ridiculously expansive nature of copyright law, which is allowing legacy players to kill off new technologies, such things aren't allowed. And we end up with results like this, where an interesting concept (even if it tried to jump through crazy legal hoops) is flat out declared to break the law and shut down. Innovation be damned. NBC has to sell you more diapers via the commercials it's always sold in prime time. And you're not allowed to mess with that.

Filed Under: cable systems, copyright, innovation, online, streaming, tv networks
Companies: ivi