Archive of UserLand's first discussion group, started October 5, 1998.

Oops, you missed some things!

Author:Joshua Allen
Posted:9/1/2000; 1:18:44 AM
Topic:The Lie of "IP"
Msg #:20656 (In response to 20577)
Prev/Next:20654 / 20657

First, a market economy is not based on physical "things". You may have heard the phrase, "a person doesn't buy a 3/4 inch drill bit, they buy 3/4 inch holes." The first lesson of marketing is that people rarely spend money just to possess a physical object. The majority of "product" sold today in the U.S. is not tangible.

Now, the idea that you would charge for anything based on your time is absurd, especially with software. Your third grade teacher told you "A for effort", but if that is true you should dig ditches. Digging ditches takes alot more time and effort. Nobody buys effort because nobody wants effort.

Next, the idea that it is somehow ripping someone off to charge more than something costs to build seems a tiny bit more reasonable, but is, unfortunately, still wrong. The basis of negotiation is that every exchange is voluntary. Both parties must feel like they gain something from entering into the exchange, or else the exchange does not happen. So in that sense, every time that money changes hands, a win-win situation has been created. You need only think about it for a few minutes to realize that fairness demands that you charge exactly as much as the other guy is willing to pay for whatever he is getting from you. It's a safe bet to assume that all parties in an exchange will behave selfishly. If you don't, you're going to get screwed. If you do behave selfishly, the law of voluntary exchange guarantees you that you will win. You don't have to commit if you don't think you will get any value out of the exchange, so worst case is that things stay the same, and you will have to look a bit harder for a win-win.

This is why your law of scarcity is false. When you realize that scarcity is a lie is when you can begin to participate in the magic of the markets. Remember that every exchange is a win-win situation. When you realize this, then all you need do to "win" is find a way for the other guy to "win", then you start looking all over for opportunities to create a win-win where there was nothing before. When enough people catch on, civilization advances. There is no scarcity, just infinite possibilities for plentitude beyond your wildest imagination if only you figure out how to unlock them.

The fact that a straight exchange with no new "atoms" being created takes place during purchase misleads people to think it's a zero-sum game. I think a good example helps here. Imagine that you are living in a village that has no good water. You are very good at digging holes, but do not know where to dig. Another in the village is great at finding water beneath the surface, but cannot dig. You need each other if you are to succeed at finding water. So do you work together to dig the well, then fight over the water later? No! You agree beforehand on how the spoils of your effort will be shared. If you both reach a situation you find amicable, you dig.

The essential point is that no exchange ever takes place unless there is something created that did not exist before the exchange!! If an exchange were truly a zero-sum game, nobody would buy anything! When you buy an e-mail address at well.com, you don't do it to get an e-mail address, you do it for the prestige that name carries.

In the above example, you could even agree to sell the water to the villagers at a small price. So not only was there a negotiation and a win-win between you and your co-worker, but there is a negotiation between the owners of the well and the townspeople. So we have just described a scenario of people working together to create something of value that was not available before and then allowing others to share in the value thereby created. This is exactly what a corporation is.

In a very real sense, though, every situation that creates a previously non-existent win-win will involve negotiation. Negotiation is not a bad thing -- if you are talking with someone else about how to divide up a pile of cash, that's a good thing! However, the naive mind might ask, "why must negotiations always be so selfish?" The fact is, any system that depends on the other guy to behave in an altruistic manner is doomed to failure. You may think it is good to charge based on cost, but the most morally correct thing you can do is charge as much as you can possibly get.

So now you tell me that you don't mean just charge based on cost, but charge only for services. But in essence this is what intellectual property is about. The intellectual property rights are part of the "contract" that is negotiated into the win-win to get the creator to enter into the exchange in the first place. It has nothing to do with scarcity, and everything to do with protecting the creator's investment. Before the printing press allowed mass reproduction, IP was not an issue. But it is grevious error to think that IP laws were an attempt to somehow "prevent" pirating of intellectual property that was being caused by this new medium. In fact, the printing press made possible the idea of intellectual property. Think of it this way -- the effort required to reproduce literature before the printing press meant that literature was always an expense incurred while pursuing some other goal, such as spread of a religion. One of the greatest successes immediately following invention of the press was Machivelli's "The Prince". You see, a self-serving prince would never copy such literature by hand, but the invention of the press made it possible for him to profit from the literature. Thus the invention of the press meant that it was now possible to make literature to serve people's demands, and a market was born.

As communications and duplication of people's creations becomes even easier, the value that IP can bring to society is not diminished. In fact, it is increased! As the communications revolution changes everything around us, intellectual property becomes the only property that has value. The new economy only means that the fruits of a strong mind will become even more valuable. And why you would want to throw that away for an hourly job is beyond me.

peace,
-J

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