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On Money, Creativity, and the Internet

This could be a very boring subject where I lecture on and on and make people skip over the key points because they're too busy surfing porn or whatever. Fortunately, I'm taking this seriously enough that I can hopefully avoid lecturing. And hey, I got porn in the first paragraph. Feedback and comments are more than welcome, even if it's just nitpicking of typos. This is as close to a manifesto as I can get.

The topic I'm going to cover, economics and the Internet, is a deep topic and I'm not even going to scratch the surface. It's also a highly controversial, highly contentious subject that's tied in with politics and monopolies and all manner of economic contusions. I'm not going to go into any of that, except where I really have to. Instead, I'm going to focus on the main issues and how they translate into the real world — not only in my own dreamland of free culture but also in the world today, with agencies like the RIAA, MPAA and many others.

I'm also not going to go into nearly as much depth as Lawrence Lessig did in his book, Free Culture[0], nor am I going to go on too much about the Creative Commons — even if the latter is something I believe in rather strongly. To do so would be to cover too much ground, and this is a short web essay, not a book.

With what I'm not talking about out of the way, I can finally get started.

There are three kinds of economics out in the world. The one that most people understand is the zero-sum game — stuff moves around, but nothing is added to the system. The most common example: I buy a chair from Harry. I give Harry money, I get a chair. While I'm up a chair, I'm down by an amount of cash, and vice versa. The position of things in the system has changed, the ownership has changed, but nothing has been created and nothing has been destroyed. The system still contains money, and the chair.

The negative-sum game is a system where the number of things in the overall system decreases with transactions. I pay Harry to destroy his chair. I then destroy the chair. Our system contains money, but no chair. It also contains scraps of wood, but the scraps of wood have less of a value than the chair did. The end result is that Harry and I, when considered as a system, have less at the end than we did at the beginning.

Finally, the positive-sum game is what I'll be discussing the most. I buy a chair from Harry. Harry makes an identical copy of the original chair and gives it to me. I pay Harry for that copy. Our system contains money, and two chairs — the total amount of stuff in the system has increased.

The zero-sum game makes sense. I pay someone, I get something and only one something. The whole idea is perfect for a world where scarcity reigns — where we can't magically make more stuff. It makes sense on an instinctive level. You give something to someone and he has to give you something of equivalent value because you no longer have what you've given him. If you only have one table, you need compensating for the fact that once the transaction is over, you will have no tables.

It's here that I really should tackle the subject of money. Money is an abstraction, a set of numbers that people use to quantify the value of objects. Money doesn't always mean the same thing at the same time, as anyone who has been stung by exchange rates can attest. But money is strictly regulated in most parts of the world — only the government or government supervised organisations can authorise creating more, and both the government and the rest of the world decide how valuable it is.

Money adds a layer of abstraction to a transaction, but also a level of precision. If you sell something for money instead of receiving other goods in kind, you're not being rewarded with anything physical — you're getting a lot of bits of paper that signify numbers that happen to mean something at the time they're given out. You aren't being compensated immediately for the loss of what you sold, unless you collect pieces of paper with symbolic value. Money is instead something that is redeemable for other things of value. If I sold a can of beer to Harry and Harry paid me in money he's not giving me a can of beer in return, or a fish supper. He's giving me tokens that I can use to decide my own compensation for that can of beer at a later date. If I choose not to take that compensation and instead hold on to the tokens, I don't get anything that is of value out of the transaction immediately. But if I sold ten cans of beer, I could redeem these tokens for a bigger thing than I could from one — a couple of bottles of vodka, perhaps.

People don't like to think about money being just a representation. Lots of people spend their lives chasing after the stuff, trying to get a big number in a computer somewhere to be as high as it can be so they have the biggest bank account, the most money. Some people do it because they believe that since money measures value, the amount of money someone has measures their value as a person. Moving past the realms of the completely nonsensical, most people who chase money want to do something with it. Maybe they want to go to university, or have a holiday somewhere exotic, or buy a top of the line motorcycle. The money is being held only because it will help that goal.

So. Money is a representation of value that lots of people mistakenly think has value in and of itself. Staying on the subject of intangibles that people have misconceptions about, we get to the other main tangent of this essay: creative work. Creative work, for my purposes, is anything that isn't implicitly tied to a medium. The design of a Chippendale chair is not a creative work, because you can't separate the design from the chair. If you have that design, you have a chair. A story is a creative work. You could have a paperback or hardback book. You could have an electronic file in any format from HTML to PDF for viewing on a computer. You could have the story loaded onto a PDA or mobile phone. You could have an audiobook on tape, CD or electronic file. Any of these could be in any number of languages. The thing is, you'd still have the same story. Thus, the story is a creative work.

Before anyone accuses me of self-interest (what with being a writer and all) anything that can be divided from it's format is a creative work. Pictures can be rendered in Photoshop, Paint, or oils on canvas. The final picture can be scanned into a computer image, repainted in any medium, and recoloured. Likewise video can be created and distributed in a number of formats and languages, both electronic and non, while still being the same video. All of these things are creative works.

Quite rightly, most (but not all) creators believe that they should be compensated for the time spent creating these works. The problem is that this compensation can't work in the zero-sum model. The amount of stuff, the amount of creative works, increases. It's new stuff added to the system. This new stuff doesn't remove anything from the system that was there before — it isn't limited by scarcity like table-makers are limited by the scarcity of wood. Different people get different amounts of value out of a creative work, in a fashion that is far more drastic than the relative value of tables and chairs. Yet the system that creators are stuck with for compensation — money — is a system for representing value in zero-sum games. The interplay between money and creative works is a fundamental disjoint.

From here I could segue quite easily into the financial interface provided by copyright, but I'm not going to. This isn't about copyright. This is about economics, and about value. I must however note that copyright as it was originally intended was an interface between the positive-sum game of creativity and the zero-sum game of traditional economics[1].

The problem with the current situation is that creative work is treat the same as a traditional commodity. While that was originally true, the ability to divest the creation from the medium makes it harder and harder to treat creative work as a commodity, and to insist that people compensate a creator and publisher a fixed value that does not just cover the raw materials that went into the creation of the book but also compensates the writer for his creativity. As my next point illustrates, this is only one of the possible economic models for creators, and it is by no means the best.

As mentioned before, creative work is flourishing on the Internet. This presents a problem for people trying to apply the existing economic models to creative work, because the Internet is also a positive sum system. One file can be copied an infinite number of times, without any way to tell the copies apart from the original file. The theoretical limit — that people will run out of disk space — is a nonentity. The average desktop machine shipping in the USA or Europe has enough space to hold text equivalents of over a quarter of all books published in the last two hundred years[2]. An average consumer can double that for less than $200 American. Space is not an issue.

If I post a story on my website as a file, you can make a copy of it, and distribute that copy, and your friends can make copies, all without me knowing. I never lose anything tangible. My copy of the file remains with me. Since I don't lose anything, the need to compensate me for the lost product — as one needs to in the case of physical books, which cannot be infinitely copied — is lost. Nobody loses anything.

It's here that I must again diverge into potentially hostile waters: Copyright infringement (the act of distributing a copyrighted work without the copyright owners' permission[3]) is not theft. Theft is a crime because the thief denies the use of some tangible thing. Thievery works with scarcity as it reduces the amount of product that can be sold. But without that increase in scarcity, it stops being theft. People claiming otherwise don't understand anything but zero-sum economics.[4]

Most creators still want to be compensated for creating, and here's where the problem comes in. Because creative work has been treat as a commodity for so long, many creators see the situation in terms of zero-sum economics, and attempt to filter the positive sum game of creativity through zero-sum economics to deal with the positive-sum Internet.

There's a lot of legalese that a lawyer will happily charge millions to explain behind why, but step back. Doesn't that seem rather strange? Why bother with the zero-sum economics in the first place? For most creators, the answer falls between the law, and tradition.

The law hasn't yet caught up with the Internet. Copyright and trade law solely deals with the economics of scarcity, and can't handle positive-sum economics. That's the root of content providers denying consumers their rights through various “Digital Rights Management” technologies. Companies often believe that they have to do so, when really that isn't true. The other reason is tradition. The creators are used to the traditional economic model and working out a new one that takes into account the possibility of instant worldwide distribution takes too much time. It's easier to go with what they know and think works.

So far I haven't been very flattering of the present economic model as applied to the Internet and to creativity. That isn't fair. It handles the situations it was created for marvellously. But now it is being applied to something it wasn't designed for, and the whole economic model is slowly breaking down. Rather than just doomsaying about how things are, I may as well point out how they could be.

Creators need to divorce themselves from the idea of single file = single physical instance (e.g. book) = single sale. Indeed, divorce the idea of an electronic file being equivalent to a book. it isn't. The production costs and nature of the whole thing are — or at least should be — entirely different. The existing method works well enough to sell print edition books, prints of paintings, and VHS recordings. These are individual instantiations of physical media that do cost and are reliant upon scarcity. But what about those electronic files? What about that Internet?

Micropayments can work, if the creator understands what she is doing. Micropaying for one file doesn't mean that one person gets one file. It means that one person starts a chain of passing around the file to interested people. Some of those interested people will come back and pay again, some won't. Some will even go out and buy the physical artefact, and here's where the real profit comes in. The file, while it maybe only cost ten or twenty or fifty cents to get, spreads between people for free. These people are given the work as a form of advertising, and can either make a micropayment of their own or buy a physical copy if they like it that much. The reward for all the Internet releases doesn't come from the micropayments themselves but increased sales of the physical artifact. This method is more prevalent among writers than any other group. Several experiments have proved this method to work even when the electronic version is free.[5]

Another way is to ask for donations. That way, people can return the value that they felt they received from the creative work without being forced to pay what the creator believes his work is worth. Again, several experiments have proved that this method can work both with people pre-donating (based on sample work) and donating after the work has been released. The main issues are the lack of a decent donation system[5], and the chances for creator to take pre-donations and never produce the finished work. This isn't “holding out the begging bowl”, as lots of people like to categorise it. Rather, this form of reward is a return to the sponsorship of creators by people who want to see the creation. In the past, these sponsors were always the members of the upper classes, who could thus control what other people got to see. The power in this sponsorship comes from the readers, irrespective of social standing, who can ensure that the media they want to see is produced.

These methods are just the next step towards developing a full positive-sum economic model. But they do need thinking about. The actions of monolithic copyright holders are turning creative content on the Internet into a negative-sum game. They have outright stated a business model of buying up people's rights to work that they own under the law and selling those rights back for a bigger slice of profit. It's not that these agencies are evil, necessarily. Lots of people are just accepting what they do without questioning and without realising that there might be another way.

Hence this essay.

[0]: Available for free from the link under a Creative Commons license.
[1]: This is a specialised definition of copyright that I'm only using because a) it fits and b) it avoids all the current controversy. Copyright originally restricted who could print and sell specific books, turning the creative work behind a specific book into a commodity (the printed copies of the books) and preventing anyone else from copying the books in the same way that the law regulates table-makers stealing wood from each other.
[2]: That space being 1Tb. I'm using a very rough estimate.
[3]: Read that last part again. Some creators encourage people to share and distribute their work. I am one of them, but certainly not the only one.
[4]: The term “piracy” means “robbery on the high seas”. It has nothing to do with copyright infringement, being instead a nice defaming label for agencies like the RIAA and MPAA to use for people who infringe copyrights.
[5]: Paypal, bitpass and the like are all good first steps, but need developing much further.

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digitalraven
Nov. 12th, 2004 07:03 pm (UTC)
Read it a while back. The author has engaged the cranioanal interface far too tightly. Brain mired in zero-sum economics to the point of seeing attempts to lay an interface to positive-sum as a hinderance to his getting cash, without bothering to apply brain go anything more than personal xero-sum greed.

Note that nowhere do I claim that I have detailed the only two positive-sum possbilities, just the two that have had the most success.
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