capitalism – Techdirt (original) (raw)

Why Tech Might Actually Be The Solution To Capitalism's Addiction Problem

from the problem-not-a-problem dept

Source: The Atlantic

Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, published a frightening article about technology and capitalism in the April edition of The Atlantic magazine. MacGuineas contends that the tech companies are manipulating us into using their products, addicting our children to potentially harmful devices, and stealing our extremely valuable data in exchange for “free” services.

The Masses Are Not So Easily Manipulated

MacGuineas warns us of “habit-forming” products and the “Orwellian art of manipulating the masses”:

Many technology companies engineer their products to be habit-forming. A generation of Silicon Valley executives trained at the Stanford Behavior Design Lab in the Orwellian art of manipulating the masses. The lab’s founder, the experimental psychologist B. J. Fogg, has isolated the elements necessary to keep users of an app, a game, or a social network coming back for more. One former student, Nir Eyal, distilled the discipline in Hooked: How to Build Habit-Forming Products, an influential manual for developers. In it, he describes the benefits of enticements such as “variable rewards”—think of the rush of anticipation you experience as you wait for your Twitter feed to refresh, hoping to discover new likes and replies. Introducing such rewards to an app or a game, Eyal writes approvingly, “suppresses the areas of the brain associated with judgment and reason while activating the parts associated with wanting and desire.”

Except the masses aren’t so easy to manipulate. One experiment on online shopping behavior found that the whales in the market are not influenced much at all by advertising: “More frequent users whose purchasing behavior is not influenced by ads account for most of the advertising expenses, resulting in average returns that are negative.” Arguably the most famous line in the history of the advertising industry comes from nineteenth-century retailer John Wanamaker: “Half the money I spend on advertising is wasted, the trouble is I don’t know which half.”

Even with the advent of microtargeting based on behavioral and contextual data, there is still a debate within the industry about whether advertising is worth the cost. A 2014 piece in The Atlantic by Derek Thompson is simply titled, “A Dangerous Question: Does Internet Advertising Work at All?” Thompson comes to a bleak conclusion: “The more we learn which half of advertising is working, the more we realize we’re wasting way more than half.”

There’s also reason to believe that advertising and other persuasive techniques are less effective in the internet age than they used to be. We have moved from an environment of information scarcity — in which companies had some amount of control over their brand image — to one of information abundance. As Thompson put it,

Think about how much you can learn about products today before seeing an ad. Comments, user reviews, friends’ opinions, price-comparison tools: These things aren’t advertising (although they’re just as ubiquitous). In fact, they’re much more powerful than advertising because we consider them information rather than marketing. The difference is enormous: We seek information, so we’re more likely to trust it; marketing seeks us, so we’re more likely to distrust it.

Even if targeted advertising is very ineffective at influencing consumer decisions, maybe cutting-edge machine learning algorithms — the ones used to recommend content in social media feeds — can still make a big impact on user behavior. Consider this recent story from the NYT (emphasis added):

Google Brain’s researchers wondered if they could keep YouTube users engaged for longer by steering them into different parts of YouTube, rather than feeding their existing interests. And they began testing a new algorithm that incorporated a different type of A.I., called reinforcement learning.

The new A.I., known as Reinforce, was a kind of long-term addiction machine. It was designed to maximize users’ engagement over time by predicting which recommendations would expand their tastes and get them to watch not just one more video but many more.

Reinforce was a huge success. In a talk at an A.I. conference in February, Minmin Chen, a Google Brain researcher, said it was YouTube’s most successful launch in two years. Sitewide views increased by nearly 1 percent, she said — a gain that, at YouTube’s scale, could amount to millions more hours of daily watch time and millions more dollars in advertising revenue per year.

YouTube’s “most successful launch in two years” netted the platform a less than 1 percent increase in views. Across a billion users this is a significant achievement. But from the perspective of the individual YouTube user, this change is barely noticeable. Some people seem to believe that humans are sheep and tech companies are shepherds that can guide them wherever the profit motive leads. But the data contradicts this thesis at every step.

MacGuineas also leaves out some crucial context about Eyal’s book Hooked. As he told Ezra Klein in an interview for Vox, Eyal wrote the book not only to explain how Big Tech was trying to influence us but also to democratize these tools for small- and medium-sized businesses. The hope was that once small competitors had the same tools and strategies as the tech giants, there would be a more level playing field in the market. The techniques described in Hooked are now common knowledge across many industries and therefore it is unlikely that consumer decisions between product A and product B are distorted on the margin.

It’s also worth noting that Eyal recently wrote another book called Indistractable: How to Control Your Attention and Choose Your Life. The goal of the book is to provide readers with tips, strategies, and advice for aligning their short-term behavior with their long-term goals. People should be accountable for the decisions they make about how to spend their time and money and books like Indistractable are useful in helping individuals make the best choices for their self-interest in the long run.

MacGuineas also chooses to cite an odd example of the harms caused by the tech industry:

And [the tech companies] do, in fact, manipulate our behavior. As Harvard Business School’s Shoshana Zuboff has noted, the ultimate goal of what she calls “surveillance capitalism” is to turn people into marionettes. In a recent New York Times essay, Zuboff pointed to the wild success of Pokémon Go. Ostensibly a harmless game in which players use smartphones to stalk their neighborhoods for the eponymous cartoon creatures, the app relies on a system of rewards and punishments to herd players to McDonald’s, Starbucks, and other stores that pay its developers for foot traffic. In the addiction economy, sellers can induce us to show up at their doorstep, whether they sell their wares from a website or a brick-and-mortar store. And if we’re not quite in the mood to make a purchase? Well, they can manipulate that, too. As Zuboff noted in her essay, Facebook has boasted of its ability to subliminally alter our moods.

Pokémon Go is ostensibly and actually harmless. When an augmented reality video game nudges you to walk by a Starbucks, you do not suffer any tangible consumer injury. You still retain your autonomy and the research shows that tiny nudges like this have almost no effect on your ultimate choices. It would be unsurprising if in the near future companies pulled their spending from Pokémon Go because it proved to be ineffective, like so much of the rest of the advertising industry.

Teens Are Addicted to Their Screens — and Not Much Else

According to Common Sense Media, “US teens spend an average of more than seven hours per day on screen media for entertainment, and tweens spend nearly five hours.” MacGuineas finds this usage alarming, calling tech products “addictive” and “potentially harmful”:

American society has long treated habit-forming products differently from non-habit-forming ones. The government restricts the age at which people can buy cigarettes and alcohol, and dictates places where they can be consumed. Until recently, gambling was illegal in most places, and closely regulated. But Big Tech has largely been left alone to insinuate addictive, potentially harmful products into the daily lives of millions of Americans, including children, by giving them away for free and even posturing as if they are a social good. The most addictive new devices and apps may need to be put behind the counter, as it were—packaged with a stern warning about the dangers inherent in their use, and sold only to customers of age.

This much screen time sounds excessive, and maybe it is. But while the use of technology by teenagers (e.g., smartphones, social media, video games) has been trending up over the last 20 years, risky behavior (e.g., drugs, alcohol, cigarettes, sex) has been trending down for almost every category:

Source: Washington Post

Which of these is “capitalism’s addiction problem”? Given how many risky behaviors are on the decline, tech products may be capitalism’s addiction solution rather than its problem.

Now, as Jonathan Haidt has shown, there is some valid concern about the effect social media has on certain subgroups, in particular pre-teen girls. The rate of non-fatal self harm in this group nearly tripled between 2000 and 2015. But does this mean we need government regulators to ban these products for everyone?

Not quite. Haidt recommends simple advice for parents to protect their kids: “I am on a campaign to encourage parents to adopt 3 norms: 1) all screens out of bedroom 30 min before bedtime; 2) no social media until high school; 3) time limits on total daily device use (such as 2 hrs or less).” Given the evidence, these kind of limits seem reasonable for mitigating the harms caused of letting children use technology at too young an age.

Pay for Facebook? Who, me?

Lastly, MacGuineas also thinks regulators should require people to pay for Facebook:

Perhaps the most immediate and important change we can make is to introduce transparency—and thus, trust—to exchanges in the technological realm. At present, many of the products and services with the greatest power to manipulate us are “free,” in the sense that we don’t pay to use them. But we are paying, in the form of giving up private data that we have not learned to properly value and that will be used in ways we don’t fully understand. We should start paying for platforms like Facebook with our dollars, not our data.

The logic here is: 1. Your data is more valuable than you realize. 2. Therefore, you should be forced to pay Big Tech companies to access services that are currently free. It also betrays a certain level of privilege to ignore the fact that many people, especially those in the developing world, cannot afford to pay for these digital services. And while it may feel different in our own solipsistic worlds, the sad truth is that our personal data is not worth nearly as much as MacGuineas and others claim.

The prices from the data broker market are startling low:

Given the reality of the market valuation of our personal data, we should just take the free services.

The tropes in this article are nothing new for those who have been following this debate over the last few years. The false narrative that tech is especially addictive and harmful has been on the rise for quite some time now. Unfortunately that doesn’t make it any more true.

Alec Stapp is the Director of Technology Policy at the Progressive Policy Institute

Filed Under: addiction, capitalism, maya macguineas, screens, technology

Techdirt Podcast Episode 177: Why People Don't Trust Capitalism Anymore

from the market-based dept

The tides of public opinion on economics seem to be shifting, and criticism of the very idea of free markets is on the rise. The conversation is messy, confusing, and transcends many traditional political boundaries — so we’ve got an expert source to help us dig in. EconTalk host Russ Roberts joins us to look at why so many people don’t trust capitalism anymore.

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Filed Under: capitalism, economics, free markets, podcast, russ roberts

Rupert Murdoch Admits, Once Again, He Can't Make Money Online — Begs Facebook To Just Give Him Money

from the that's-not-a-business-model dept

There’s no denying that Rupert Murdoch built up quite a media empire over the decades — but that was almost all entirely focused on newspaper and pay TV. While he’s spent the past few decades trying to do stuff on the internet, he has an impressively long list of failures over the years. There are many stories of him buying internet properties (Delphi, MySpace, Photobucket) or starting them himself (iGuide, Fox Interactive, The Daily) and driving them into the ground (or just flopping right out of the gate). While his willingness to embrace the internet early and to try things is to be commended, his regular failures to make his internet ventures successful has pretty clearly soured him on the internet entirely over the years.

Indeed, over the past few years, Murdoch or Murdoch surrogates (frequently News Corp’s CEO Robert Thomson) have bashed the internet at every opportunity, no matter how ridiculous. Almost all of these complaints can be summed up simply: big internet companies are making money and News Corp. isn’t — and therefore the problem is with those other companies which should be forced to give News Corp. money.

A few years back, I ended up at a small media conference where Rupert’s son James Murdoch spoke at great length about his plans for News Corps’ internet business — and what struck me was that he was almost 100% focused on copying the pay TV model. This wasn’t a huge surprise — I think at the time he was running Sky TV — but it shocked me that he appeared to think through force of will he could turn the internet into a walled garden a la cable and satellite TV systems. Not surprisingly, Rupert is thinking along similar lines, and earlier this week released a bizarre and silly statement saying Facebook should start paying news sites “carriage fees” a la cable companies:

The time has come to consider a different route. If Facebook wants to recognize ?trusted? publishers then it should pay those publishers a carriage fee similar to the model adopted by cable companies. The publishers are obviously enhancing the value and integrity of Facebook through their news and content but are not being adequately rewarded for those services. Carriage payments would have a minor impact on Facebook?s profits but a major impact on the prospects for publishers and journalists.

We’ve seen this kind of thinking many times before. First the argument was used against Craigslist. Then Google. And now, apparently, Facebook. The short version is “these internet companies are making money, we news companies aren’t — ergo, the successful internet companies should be paying the failing news companies.” For someone who claims to be a died-in-the-wool free market capitalism supporter and who insists that socialism is “immoral,” I can’t help but note that this appears to be Rupert Murdoch asking for successful companies to subsidize his failing companies in the interest of “social value.”

Indeed, contrast his begging Facebook for handouts with his pro-capitalism speech from a few years ago. In it, he notes that “to succeed, you have to produce something that other people are willing to pay for.” And that’s just the thing, Rupert, the market dynamics here say that no one is willing to pay to “carry” your news. Tony Haile, the former CEO of Chartbeat and the founder of a new company Skroll that is working on media business models (and, randomly, who I met at that very same conference where James Murdoch spouted his nonsense) has laid out a pretty clear explanation for why the carriage fee model doesn’t make any sense at all on the internet. The market dynamics are totally different — the leverage and value positions of the players are different, the value to the end users is different and the market barriers to entry are totally different, meaning a totally different competitive market.

Indeed, the internet and Murdoch’s reaction to it are truly fascinating, as they strip away The Emperor’s New Clothes concerning Murdoch’s supposed support of free market capitalism. He claims to be in favor of it when it helps him to accumulate hoards of cash, but as soon as he can’t build a successful competitive business, he suddenly resorts to the “immoral” position he supposedly loathes — demanding that the other successful operations just fork over money to him because he (claims he) provides tremendous social value.

There are, of course, plenty of discussions to be had about media business models — and the power that companies like Google and Facebook hold. But to merely demand they hand over “carriage fees” just because makes no sense. It’s a weak demand from someone who failed in the market and has no desire to truly innovate or compete. It ignores, too, that such a setup would only entrench existing players and harm upstarts and competitors. The whole thing is quite silly — but also quite incredible for what it truly reveals about Murdoch’s actual feelings for a free market when he’s on the losing end of one.

Filed Under: business models, cable tv, capitalism, carriage fees, competition, free market, james murdoch, journalism, news, rupert murdoch, socialism, tony haile
Companies: facebook, news corp

Techdirt Podcast Episode 90: Is Capitalism Over?

from the not-exactly... dept

As technology ushers more and more things towards the realm of “post-scarcity”, an inevitable conversation has arisen around the very roots of capitalism and what this rapid change means for our economic systems at the most fundamental levels. But the answer is far from simple — is capitalism dying? Can it evolve? Is the whole question being framed incorrectly? This week, we discuss the notion of a post-capitalist world, what it might look like, and how close it actually is.

Follow the Techdirt Podcast on Soundcloud, subscribe via iTunes, or grab the RSS feed. You can also keep up with all the latest episodes right here on Techdirt.

Filed Under: capitalism, communism, economics, podcast, scarcity, socialism

Techdirt Reading List: Postcapitalism: A Guide To Our Future

from the thought-provoking dept

We’re back again with another in our weekly reading list posts of books we think our community will find interesting and thought provoking. Once again, buying the book via the Amazon links in this story also helps support Techdirt.

There are all kinds of viewpoints in the tech world concerning how technology changes society and economics. Many have argued, for example, that things like open source software, or even the concept of “free” are somehow “anti-capitalist.” For many years I’ve argued against this viewpoint, noting that it’s absolutely possible to understand free digital/infinite goods in the context of traditional capitalist economic models — and I still believe that. All it takes is a better understanding of zero, and a recognition that when something becomes “free” it doesn’t remove all value, but rather expands massively (perhaps infinitely) a resource that can be used to produce other things.

Still, getting to that realization may require a massive cultural mindset shift, and I’m at least more sympathetic to claims from some that the only way to reach that more complete understanding is to argue that it’s going beyond capitalism in some sense. Two years ago, I wrote about this in reviewing Jeremy Rifkin’s Zero Marginal Cost Society, in which I questioned if it was actually the “end of capitalism” as Rifkin posited, or merely a way to fix capitalism.

I have similar feelings about a book released earlier this year by Paul Mason, entitled Postcapitalism: A Guide to Our Future. The book also discusses how information technology is driving the cost of many items to zero, and how that’s potentially mucking up all sorts of legacy businesses. But, as with Rifkin, Mason recognizes that this is a good thing and has the potential to create a much better world. Also, like Rifkin, he argues that this creates a “post-capitalist” world. I still think that’s fundamentally incorrect, because things with a zero marginal cost still can work in the capitalist construct — but as resources instead of products. However, that doesn’t take away from the thought-provoking nature of Mason’s book in getting people to think about how society, culture and business can change thanks to the spread of technology. And, perhaps I’m just being stubborn in trying to convince people that it’s still capitalism. If thinking of it as “post-capitalism” gets people past the mental roadblocks to accepting zero marginal cost items, perhaps that’s the best way to do it.

Filed Under: capitalism, paul mason, post capitalism, reading list, techdirt reading list, zero marginal cost

Sculptor Says 'Capitalism' Drives His Aggressive Enforcement Of Rights To Publicly-Funded 'Portlandia' Statue

from the cognitive-dissonance-much? dept

Portland is home to the second-largest “hammered-copper statue” in the nation. Only the Statue of Liberty has it beat. It was commissioned by the city of Portland and is placed prominently downtown. But, unlike the Statue of Liberty, you won’t find the “Portlandia” statue gracing a variety of third-party goods.

You would think the image of Portlandia would adorn postcards, photos and T-shirts. She doesn’t. That’s because her maker, Washington, D.C.-based sculptor Raymond Kaskey, has, over the past three decades, often threatened to sue those who dare use photos or illustrations of Portlandia for commercial purposes.

Kaskey fiercely protects his creation. He sued the makers of “Body of Evidence,” resulting in a small settlement and removal of background footage containing his work. He also battled with a brewery which mistakenly thought the publicly-commissioned statue standing on public land was public domain. This mistake was quickly corrected.

Later informed that Kaskey aggressively protects his copyright—which won’t expire for 70 years after the septuagenarian Pittsburgh native dies—Laurelwood owner Mike DeKalb decided to contact him about securing the rights before this year’s labels were printed.

That negotiation was successful, though both parties declined to disclose the fee paid.

Kaskey has one motivation for this aggressive pursuit of commericial use.

“To make some money—that’s the single best reason,” Kaskey said. “It’s called capitalism.”

All well and good, I suppose, but Kaskey’s motivation flies in the face of the more socialist origin of his well-defended work.

Kaskey… was paid 228,000inpublicfundsandreportedlyanother228,000 in public funds and reportedly another 228,000inpublicfundsandreportedlyanother100,000 in private donations to create Portlandia.

All this public money to create statue at the behest of public representatives which now resides on public land — and yet, “Portlandia’s” ownership lies solely in the hands of Raymond Kaskey, thanks to a 30-year-old city policy that allows artists to retain ownership on publicly-funded work. Kaskey (obviously) thinks the policy is a good idea.

“It was a forward-thinking decision, Not many cities respected artists’ rights in those days.”

I think when a city gives you $228,000 to create artwork, it has given you enough “respect.” Kaskey still demands more, though. While he doesn’t seem interested in the thousands of amateur photographs circulating publicly, he definitely seems to be on top of it should any potential commercial uses present themselves.

An artist selling $6 brooches loosely based on the statue has also dealt with Kaskey, who only asked for a license fee if she managed to sell ten of them. So far, she hasn’t sold any — something at least partly due to Kaskey’s aggressive protection of the work.

[The artist] has had to explain what the statue is to friends to whom she’s gifted them.

“In a way, it’s nice that the Portlandia image isn’t overused and used on tacky souvenirs,” Yerby says, “but it is kind of sad no one can recognize her.”

Kaskey own website claims his studio has produced a “a prominent body of public work,” but when it’s locked up for 70 years past his death, it’s hardly “public.”

Filed Under: capitalism, copyright, culture, portlandia, public funds, raymond kaskey, statue

Is The Zero Marginal Cost Society The End Of Capitalism… Or A Way To Fix Capitalism?

from the interesting-book,-questionable-premise dept

As regular readers here on Techdirt will know, I’ve been talking about the importance of understanding what happens to economic equations when the marginal cost of something is zero for over 15 years already. It’s a very common theme around here. One of my complaints has been that those who came out of an economic world viewpoint in which economics is entirely about dealing with the efficient allocation of scarce resources, tend to fall into a weird intellectual black hole when they try to put a zero in the equation. But I’ve long argued that this is the wrong way to look at things. The basic equations still work fine, it’s just that you have to recognize the flip side of zero is infinity. When you have a zero marginal cost item, you are creating an infinite good — a resource that can never run out. When you begin to realize that you have a new form of resources — inputs in economic terms — suddenly you realize that you’re massively expanding the pie, allowing incredible new things to be created from that limitless pool of resources. That’s powerful stuff.

So, as you can imagine, I was excited when the publisher of Jeremy Rifkin’s new book, The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism, reached out to send me a promo copy a few weeks ago. I am only halfway through it, so I’ll probably write more about it when it’s done, and there’s an awful lot of really interesting examples and profound thinking going on. So I’m really enjoying the basic part of it. However, there’s one aspect of the book that I have trouble with, and it’s exemplified in Rifkin’s op-ed in the NY Times a few weeks ago, called The Rise of Anti-Capitalism. You can probably already suspect the problem I’m seeing, based on the title. The explanation of zero marginal cost and how more and more of our economy is heading there is spot on. And, as we’ve been noting for over a decade as well, this goes way, way beyond just “content” like music and movies. It’s going to impact nearly every important industry in our lives:

The first inkling of the paradox came in 1999 when Napster, the music service, developed a network enabling millions of people to share music without paying the producers and artists, wreaking havoc on the music industry. Similar phenomena went on to severely disrupt the newspaper and book publishing industries. Consumers began sharing their own information and entertainment, via videos, audio and text, nearly free, bypassing the traditional markets altogether.

The huge reduction in marginal cost shook those industries and is now beginning to reshape energy, manufacturing and education. Although the fixed costs of solar and wind technology are somewhat pricey, the cost of capturing each unit of energy beyond that is low. This phenomenon has even penetrated the manufacturing sector. Thousands of hobbyists are already making their own products using 3-D printers, open-source software and recycled plastic as feedstock, at near zero marginal cost. Meanwhile, more than six million students are enrolled in free massive open online courses, the content of which is distributed at near zero marginal cost.

Frankly, I think the power of zero marginal cost goods — or, as I prefer to call them, infinite goods — is almost entirely ignored in energy, manufacturing and education (and, importantly, also in healthcare and finance). So it’s certainly encouraging to see Rifkin highlight where this is all heading. Where I run into trouble, however, is his belief that this then leads to “the end of capitalism” or “anti-capitalism.” To be clear, he explains how what comes out of this, a more collaborative society, will be a great thing. And, again, there’s some agreement there. I just think that it’s still very much capitalism. Capitalism does not mean that collaboration does not happen. In fact, collaboration is a key part of a well-functioning capitalist society. Ronald Coase famously laid out his theory of the firm in 1937, which explains how transaction costs are a key element in leading people to create long term collaboration. A zero marginal cost world will change the nature of those transaction costs, and will certainly change the nature of collaboration and companies, but it’s not anti-capitalist. It’s actually more exactly capitalist, where collaboration takes place with more transparency and more information. Those who believe that collaboration is anti-capitalist tend to misunderstand capitalism — either as extremist Randian Objectivists, or those so opposed to capitalism, often based on believing capitalism is what Randian Objectivists say it is.

Take, for example, this aspect of Rifkin’s argument in the NY Times piece:

THE unresolved question is, how will this economy of the future function when millions of people can make and share goods and services nearly free? The answer lies in the civil society, which consists of nonprofit organizations that attend to the things in life we make and share as a community. In dollar terms, the world of nonprofits is a powerful force. Nonprofit revenues grew at a robust rate of 41 percent — after adjusting for inflation — from 2000 to 2010, more than doubling the growth of gross domestic product, which increased by 16.4 percent during the same period. In 2012, the nonprofit sector in the United States accounted for 5.5 percent of G.D.P.

[….]

This collaborative rather than capitalistic approach is about shared access rather than private ownership. For example, 1.7 million people globally are members of car-sharing services. A recent survey found that the number of vehicles owned by car-sharing participants decreased by half after joining the service, with members preferring access over ownership. Millions of people are using social media sites, redistribution networks, rentals and cooperatives to share not only cars but also homes, clothes, tools, toys and other items at low or near zero marginal cost. The sharing economy had projected revenues of $3.5 billion in 2013.

Except, when you look, the most successful and disruptive examples of this “collaborative” approach are not non-profits or civil society, but rather perfectly capitalist companies, that have actually unlocked tremendous potential for revenue not just for themselves, but their users. Things like AirBnB, Uber, Lyrt, Sidecar, FlightCar, RelayRides, Zaarly, LendingClub, AirTasker, Kickstarter, LiquidSpace and many, many more are disrupting all sorts of industries, but doing so in ways that are actually about the more efficient use of resources, unlocking potential that had previously been locked up (often because the transaction costs were too high). But they’re not anti-capitalistic at all. They’re making capitalism much better. They’re helping to move away from power being held by just a few large companies, towards ones where individuals have more power directly.

These aren’t non-profits or civil society creating these disruptions, and it seems odd for Rifkin to imply that’s what’s happening. That’s not to knock non-profit organizations or civil society groups — both of which do great things in many cases. But it conflates a variety of different issues to argue that the response to a zero marginal cost society and infinite goods is that non-profits and civil society “take up the slack.” Instead, what we are seeing is that new forms of (very capitalist) companies are forming. They’re disruptive — but disruptive in a good way. They’re often about providing more economic freedom and power out to users, such that the transactions are actually beneficial to all players, rather than having a few large companies hoarding the power in the middle.

But having companies hoard power has never been true capitalism in the first place. It’s always been the problem that occurs when you have transaction costs that are too high, sometimes driven through political and regulatory capture, allowing certain firms to gain monopoly or oligopolistic control over certain markets, allowing them to create economic friction, increase transaction costs, and keep most of the value created, rather than distributing it to the end points. However, the new disruptive players in the market are often reversing that trend. They’re increasing trust, decreasing transaction costs, spreading much of the value to the end points, and simply taking a small cut of the transaction along the way. That’s not anti-capitalist, or the “end of capitalism” — it’s about a better recognition of what true capitalism is supposed to be about: more efficient transactions, with minimal friction, where all parties benefit from the transaction.

So there’s plenty that I find compelling in Rifkin’s book and theories, but I think that he makes a leap too far in arguing that it somehow goes against capitalism, or that civil society and non-profits are somehow “the solution” to a problem that’s not clearly a problem.

Filed Under: capitalism, economics, efficiency, infinite goods, jeremy rifkin, non-profits, peer economy, sharing economy, transactions, zero marginal cost

DailyDirt: Dysfunctional Capitalism

from the urls-we-dig-up dept

As we get closer to the most commercial holiday of the year, let’s spend some time reflecting on capitalism and what it has become. Here are some capitalism-related links to get you started.

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

Filed Under: capitalism, distorporation

In What World Is Having Three Judges Set The Price Of Streaming Music 'Free Market Capitalism'?

from the just-wondering dept

Greg Sandoval over at The Verge has an interesting post about “Pandora’s PR problem” concerning its attempt to get out from under ridiculously draconian royalty rates that are clearly unsustainable. I agree that Pandora has failed on almost every aspect of the PR front, though the article seems seriously one-sided on a few points. First, it compares Pandora’s situation to Spotify’s, where Spotify has also been criticized for its royalty rates at times, and yet its reputation isn’t quite as bad. Recently Spotify has signed some “big” name artists to publicly support its platform. Of course, the way it did so was to throw a ton of money at those artists. And there’s a strong argument that Spotify’s current royalty rates are even more unsustainable than Pandora’s — it’s just that Spotify has a long runway and is choosing to put off the eventual day of reckoning it’s going to have to face over royalty rates for internet music. Furthermore, the article seems to ignore the fact that much of the “controversy” and PR failures by Pandora are actually the result of a coordinated campaign, set up by a RIAA front group, focused on flat out lies and bogus attacks.

Of course, Pandora isn’t blameless in all of this, but I put a lot of blame on Pandora’s stupid decision back in 2009 to agree to the ridiculous rates it now realizes are impossible to sustain (something that many people pointed out at the time). But, the craziest part of the article is the claim that Pandora’s attempt to lower rates somehow goes against free market capitalism. Sandoval mentions this argument twice. First, in noting that some “conservative” groups made this argument:

Citizens Against Government Waste, a conservative think tank, accused Pandora of trying to undermine the free market.

And then again in quoting an analyst who makes the same argument:

Michael Pachter, a research analyst with Wedbush Securities, believes Pandora will eventually thrive but that its attempt to legislate lower costs is misguided. “The bill is idiotic,” Pachter said. “It’s insulting to Congress to say you want regulation to lower your costs at the expense of artists. Did you see who was on stage with Obama helping him campaign? Jay-Z and Bruce Springsteen. That’s the Democrats, and how many Republicans are going to want to legislate against capitalism and the free market?”

But neither of those claims makes any sense at all. When it comes to royalty rates for web streaming there is no free market. In fact, the status quo is so far away from the free market or capitalism as to be laughable, and it seems like anyone claiming that it represents some sort of free market is either being purposely misleading or is totally uninformed.

The rates for web streaming sites like Pandora fall under what’s called “non-interactive digital music streaming” — and the rates for those are set by a three judge board, known as the Copyright Royalty Board. If someone can explain to me how a selection of three judges flat out setting prices is a “free market,” that would be good to know, because last I checked, the government setting prices is kind of the opposite of a free market. Of course, the last time the CRB set those rates, they set them so high that it was impossible for anyone to pay those rates. That’s how completely clueless the CRB tends to be. So, in response, Pandora and other webcasters did negotiate lower rates, but those rates were still impossibly high. Some might argue since Pandora’s current rates are those “negotiated” rates, it is a free market, but that’s clearly not true either. The “fallback” that the record labels had in those negotiations was “fuck you, here’s what the CRB says the rates are, pay up or go out of business.” When they have those CRB rates as the fallback, their negotiating position is obviously quite strong, and the results are obvious. The “negotiated” rates are impossibly high. Pandora’s big mistake was agreeing to those rates (even though it felt it needed to if it wanted to actually live to fight another day).

No matter how you look at it, that’s not free market capitalism. Coming up with a way to change those rates may not be free market capitalism either, but to argue that moving away from the existing rates goes against free market capitalism makes no sense. So, if either Citizens Against Government Waste or Michael Pachter can explain how three out of touch judges with no market experience setting the official rates is “free market capitalism,” it seems like, perhaps, they shouldn’t argue that Pandora is trying to “legislate against capitalism and the free market.”

Filed Under: capitalism, copyright royalty board, economics, free market, michael pachter, music, royalties, streaming
Companies: citizens against government waste, musicfirst, pandora, riaa, soundexchange, spotify

DailyDirt: Changing The Way We Think About Charity

from the urls-we-dig-up dept

When we donate to charities, it’s never clear exactly where the money goes and whether our donations actually benefit the people they’re supposed to help. Many donors are often shocked and outraged when they learn that some executives at nonprofit charities are being paid salaries exceeding $1 million. But activist and fundraiser Dan Pallotta thinks this anger is misplaced and could damage charity fundraising, pointing out that people blame capitalism for creating inequities in our society, but then they refuse to let nonprofits use the tools of capitalism to fix the problem. Here are a few more things to think about when it comes to charities.

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

Filed Under: capitalism, charity, dan pallotta, debt relief, donations, economics, foreign aid, fundraising, marketing, nonprofits, tedtalk