March 30, 2012

SOPA could have had a compromise.

Filed under: Uncategorized — Tags: , , , , , , — admin @ 11:29 am

I have never really done this, but I’d like to respond to Paul Graham blog-style on here.

Paul, I have read many of your essays, and I’ve witnessed the “let’s break hollywood” initiative that you started, and I pretty much know where you stand on the SOPA issue. I also read your interesting analogy between content on the internet and air on the moon/earth. I feel you, I have been in the internet industry myself for many years.

BUT, I wanted to suggest to you what I think is a balanced / practical view of the matter, because you are a man who has a lot of great influence in the startup community, and I think your stance on the copyright issue makes a lot of difference. If any of my viewpoints resonate or affect your position, I think would help everyone.

Our society has grown up with this notion of “copyright” and “patents”. (I do not call them intellectual property because that is a loaded term.) They are simply government-granted monopolies to the authors and inventors, and their original goal is to promote the PROGRESS of science and the useful arts. The goal is to benefit the public.

Today, the situation has largely changed. Software patents in particular should be abolished (as I argue here: ). However, copyright is quite useful:

* It gives some recourse to blatant plagiarism. I do not think our society is ready for a completely wikipedia-style approach to art. Even Creative Comments licenses have attribution.

* It allows authors to feel that their “intellectual property” will be protected and frees them up to work on it. As a result there is less fear of freeriding — and yes, economic viability. Copyright makes the proprietary publisher / record label / magazine / news outlet model work.

(Note: this reason in no way justifies extending existing copyright durations forward or backward in time. We must fight that practice.)

* Copyright is what gives teeth to copyleft! If you want the biggest reason I think that copyright should exist, it is this: if enough “copyleft” type activities are organized over time, there is a competition between the open source (group-based) products, and the proprietary products like the ones you built with ViaWeb back in the day. Overall society wins from this competition. Over time, open source software can copy everything that the proprietary software does, provided there are enough people to put in this work. In fact the reason we can abolish software patents is because software is already copyright-protected, so to rip off a proprietary app, you need to write it from scratch! So the freerider problem is already solved for software.

Now I get into the one that causes the big controversy: Big Content.

* Copyright can be leveraged to justify big-budget productions, such as hollywood movies, and TV shows. The whole industry has grown up around this. Now, granted, they can command ridiculously high margins, withhold movies for years, and so forth. But this is the free market allowing them to do it. If you want to fight price fixing, fight the cartels that they form. At the end of the day each movie is a product that competes with any other movie. Just because we want to watch a movie, and get instant gratification does not change the economics of it. If the movie cost $20M to make, those bankrolling the movie should expect to have a chance to make a profit. Forcing the content industry to change their entire business model misses the point that laws are supposed to apply across the board. Copyright is certainly useful for helping small indie productions make a profit. You would have to lobby to have the law changed for the big budget productions, and justify why.

(Copyright makes movies, songs, etc. into “products”, which creates a mismatch: physical products have physical distribution and limited supply at each retailer. Songs and movies are just content and can be copied easier than ever. Government has to enforce this unnatural monopoly. But the problem is that for the little guys, copyright does protect them. It is true that every copyright holder, including the big guys with the popular movies, can withhold the content they create from us and artificially control the supply. But this is only painful because we crave their big budget movies, because they are not as interchangeable as we may like.)

. . .

Look, the entertainment industry may have lied about the number of jobs they are creating. The individual may be stuck in the past with their business models. All this is valid criticism. But what we must do is focus on their cartels, their old boys clubs, their culture of trying to sue grandmas with conglomerate agencies like RIAA and MPAA. We should discourage the price fixing they do to get huge margins. With today’s tools, more content can be created by less people, and more cheaply. That means there should be plenty of people competing with Hollywood soon, with Adobe AfterEffects and other new tools helping them. The question is only about the cartels and breaking into the industry. And frankly speaking, similar things exist in the tech space with Google/Facebook/Microsoft buying up companies, and VCs bankrolling startups. It’s just that in tech, there is much more variety and opportunity to do good, besides just delivering content to passive viewers.

If by “let’s break hollywood” you mean let’s break their ego-based, old-boys-club cartels, by all means we should challenge that. But if you mean that we should go after their copyright protections, I do not think there is a way to do it without huge collateral damage to our society.

PS: One last thing - about SOPA.

We all know it sucked. But the concern of the copyright industry was this — US produced movies were being downloaded by US citizens, from foreign sites more and more. Citizens that “might” otherwise pay for the movies (nevermind that they were screwing Netflix and taking their movies away).

I think there is a valid issue here, of enforcement and jurisdiction of the US government. There is a reason a “pirate bay” can’t grow to that size here in the US. It’s because the government takes down domestic sites dedicated to “intellectual property theft” if they are large enough to go after. That is part of the copyright protection.

But, of course, there must be due process. An insignificant pirate hub doesn’t become big overnight, and by the time lots of people know about it, the site can be brought to the attention of the government, and it can be sued. It may have taken years for the site to become that big. What’s another 30 days for due process to take place.

Similarly with SOPA! Personally I called my congressman and suggested the following amendment to SOPA:

When the dept of justice (or whoever is tasked with prosecuting these sites) finds a site, they contact it and issue a invitation to participate in domestic proceedings, and the invitation is good for a certain period (30 days for example). During this time, the site can respond, realize the problem, maybe make amends or reach a settlement. If they do not respond within the time period, then they are considered in default, and US financial institutions, search engines etc. could be compelled block them. However, at any time they can start legal proceedings within the US, and try to get reinstated, until the statute of limitations runs out (a few years).

This would have introduced the proper concepts of due process (inviting them to participate and offer them an opportunity to resolve the matter before taking drastic measures), jurisdiction (only US financial companies would be compelled to stop dealing with them, and possibly search engines, etc.) And IMHO it would be a good compromise.

To everyone reading this — thanks for getting to the end. I guess this letter is as long as one of pg’s essays. I have felt like many people  in the startup community, and I have tried to be open minded and get all the facts. I feel it is vital to bring this to pg’s attention as he and his batch of YC companies have a lot of effect on the world :)

February 10, 2012

Long Term Trends for Capitalism

In the past few years, as the economy faltered, the capitalism-socialism discourse has come out in high relief in American politics. Fiscal conservatives (republican and libertarian alike) decry many government programs as “entitlements” and often equate social welfare with “socialism”. Progressive taxes, and ending tax breaks for the rich are met with the catch-all term “wealth redistribution”, something that is a slippery slope to be avoided. I have described only the conservative views here, largely because they seem to me to be quite ideological, ironically enough like the communists in USSR with their intense distrust of capitalism, with its seductive excesses, corrupting the moral character and turning the proletariat into slaves. I am not trying to say that government programs are a paragon of efficiency, but that the discourse — often framed in terms of individual freedom vs the tyranny of the collective — has been used to attack everything from taxes to government investment in alternative energy (with Solyndra proving to be quite a tasty target).

Courageous and forward-thinking libertarians like Ron Paul follow the idea to its logical conclusion. They decry the “quantitative easing” by the fed (claiming its meddling causes malinvestment by those eager to find alternatives to government bonds), the crony-capitalism (as a result of lobbying and government favoritism), and the increased borrowing by the government (causing long term inflation), in an effort to correct the current perceived problems. The solution, they say, is taken from the pages of oft-overlooked Austrian economics. Trust in the invisible hand of the market — allowing cycles of booms and busts — is preferable to government regulations attempting to solve collective action problems — even the ones that seek to outlaw insider trading, front-running, excessive “vulture” speculation, and so forth. And for the most part, they could very well be right.

However, I want to talk about something else. Something deeper, that has to do with long term trends. The conclusions below are taken from what I wrote to my friends lately, and represent what I’ve come to think on the matter.

The challenge is automation

A lot of our problems today — unemployment, high cost of education, medicine, etc. — can be traced back to automation and increased efficiency by employers. They are problems today, but it is better to frame them as challenges. Since I will speak about long term trends — 10 to 30 years out, what I say below might sound a bit far fetched today.

Socialism in some form is inevitable as automation progresses. The Luddites were right, but they were a few hundred years off. As things become more automated, we will not require people’s services in more and more areas. Robots will become cheaper and more efficient even than workers in China. So, eventually the “jobs” will return to the USA, but in the form of robots.

Capitalism makes sense when things aren’t automated, when the employer honestly needs his workers and the value of their labor is above their cost of living. However, things change with time, as more and more things become automated. The less people are needed to run a company, the more supply there is of available workers, the more wage repression there is for the majority of people (workers). You can try to inject life into their economic lives by borrowing from the future (credit cards, coincidentally taking off in the 80s, gave regular consumers debt instruments to mitigate their situation), but at the end of the day their wages will simply go down, and there will be an ever growing divide between the rich and the poor. This plutocracy will happen because there won’t be enough jobs for average people, and only jobs for highly qualified people. So the average people will have to be supported in a different way than wages.

As usual, stuff has to find its way to the people, to satisfy their needs: air, water, food, shelter, sex, fun, etc. Some people have a very small economic footprint, and these people need a welfare economy to get their needs met. Just because you are not in that group right now, you might think, “out of sight, out of mind”. But as more jobs get automated, a lot of people (especially uneducated people) will become completely redundant in the workforce and they will have a very small economic footprint (not producing or earning much). So inevitably, social programs will grow as technology improves. That doesn’t mean you can’t have capitalism on top of the safety net. It just means no one will die in the street from a preventable disease as a result of not being able to find a job.

We can see some of it today

People who lose their jobs, or don’t have a college degree, find it harder and harder to get new jobs. They just aren’t qualified enough for the new marketplace and its demands. But college education is now too expensive. If only they could learn on the internet (like they increasingly can in many technical fields), and get qualified enough to enter job sectors in which there is a lot of demand… but the universities are currently the gatekeepers for the degrees in many non-software fields, and companies look for these degrees, so I would say the main blame right now can be put on the lack of reform in education.

Do you notice that the cost of everything is becoming ridiculously high in the USA? Take two high-profile professions:

isn’t it a mystery?

Education is tremendously more expensive than before, and some unconventional libertarians have been pointing it out for years. I think it mainly has to do with wage repression, and it’s only going to get worse. Here is an illustrative example:

An average middle-class family sends their kid to med school or law school or whatever. They get student loans they can never even discharge in bankruptcy. So then when they become doctors or lawyers, they start out trying to charge a lot to cover their loans. And the places compete to offer them these positions. Their salaries just go up and up, even though there are tons of unemployed lawyers now.

This feeds a bubble of education, as people try to get those high salaries and go into law school. But it’s unsustainable … there are too many people trying to become lawyers now, who may not have jobs when they graduate. Not only that but automation will make the manual work that lawyers do less and less necessary, so you will have even less jobs for lawyers.

So where will these out-of-work lawyers go? They will live with their middle class parents or do something else. Their services are not required at the moment. They might move out, take a low-paying position and defer their loans as far as they can. At the end, though, something’s gotta give. They will probably pass a new law allowing you to discharge your student loan in bankruptcy and lose your law degree as a result. The lenders will stop lending. And the education bubble will burst. Either that, or middle-class families will realize that the job prospects for a law school graduate aren’t as great as they used to be, and the bubble will gradually fizzle out that way. But it will leave less jobs in that sector, and the question will again arise … where are the jobs?

Long term basically (10-30 years), automation WILL make wage repression so high that more people will have to switch to an economy that will support the majority of the population in some other way, besides wages.


In a society where the value of individual human labor is not that high compared to the work automatic systems perform, people will have to sustain their costs of living with something other than work in redundant positions. They can become entrepreneurs, they can sell products for the entertainment of others. Capitalism will always be alive and well. But below, it a social safety net will grow, one that supports the unemployed and gives them access to increasingly cheaper (or free) medical care (by robots), food, education and information (internet), and who knows (sexbots?), we will move closer to “socialism”, an economy where every can enjoy a minimum standard of living without having to work. This will usher in true social freedom. Not having to work to survive, people can focus on enjoying a healthy lifestyle, getting enough sleep, traveling, spending time with each other, great entertainment, and bettering themselves by getting a much more in-depty education, even if it is for free via a vastly superior education system. Women won’t have to choose between career and children.

But, as experience in ghettos has shown, it may also lead to more restlessness and a feeling of uselessness in society, and more violence. People want to feel needed. Perhaps some will satisfy it with entrepreneurism or space explorations. But most will have to be content with raising their family and bringing up the next generation with love. Men will no longer need to serve society as most men’s services will literally not be required. I wonder what will happen then. In ancient times, men went to war, and not all came home, and that’s how polygamy made sense. Perhaps sex selection through genetic engineering would once again bring that about. (I will stop going off into left field now.)

The Freedom to Innovate

As technology accelerates innovation in various fields, the elements of an economy built for an older time will start getting in the way — as they already are in the software industry. Patents will become an increasing burden, a tool wielded by companies relying on old business models to protect their profits, something that is already happening with the powerful copyright lobby. Patents have been a great tool and contributed to the success of society over the last couple hundred years, but as an industry accelerates, free access to knowledge becomes more and more important. The watershed moment in an industry comes when a group realizes how to outperform systems built in “proprietary” silos, such as WebKit vs Internet Explorer, Wikipedia vs conventional encyclopedias, or eventually Linux vs Windows. They haven’t figured it out yet, but once this happens, the group will become a formidable force for innovation. At that point, patents only serve to slow everyone down and impose an innovation tax on the industry and the public. Perhaps “individualism” and “greed” will not always provide the most fertile soil for innovation, as they admittedly have been up until recently. With greater connectedness, people will have great education. With better tools, they will be able to accomplish more together. Movements built on free innovation through patentleft will give the proprietary silos a run for their money. And then, we will have to re-evaluate our economy.