Posted by Tom Foremski - April 22, 2013
Jaron Lanier, an early Internet pioneer, talks with FT Business about the new digital economies, and why free information is not a good idea.
Mr. Lanier says he was one of the first in advocating digitizing the music industry and he used to argue that free music would enable artists to make money from live shows and merchandising.
He now says that this did not turn out well and that information should not be available for free because it doesn't create the basis for sustainable wealth creation. If people and governments, paid for information as they once used to pay, it would create sustainable businesses.
Foremski's Take: Good luck putting the Genie back into the bottle. Every industry undergoing transformation to a digital business is facing enormous disruption in transitioning to new business models. The music and the news media industries are the most visible examples but there's plenty more.
Digitization also means that businesses can cherry pick the lowest-risk highest margin businesses and give away information as a loss-leader.
Google does it all the time, other companies do it too, giving away content, apps, etc, that other businesses used to sell.
Take a look at Craigslist, which cherry-picked free-classifieds and didn't have to produce the journalism that helped sell the classifieds ads. Craigslist only charges for job ads and its revenues were estimated to be $126m in 2012 and are expected to increase by $27m to $153m in 2013.
It is clearing about $103m in profits -- not bad for a private firm employing just 35 people. But to make that money it has decimated the classified ads market. A market that was worth $19.6 billion in 2000 had fallen to $6bn in 2009. The value of all those free Craigslists ads is more than $13 billion a year. Craigslist has likely destroyed more than $100bn of revenues over its long span. It's responsible for tens of thousands of lost jobs.
But it's not Craigslist's fault, it's simply the power of the Internet, a basket of virtually free, standardized technologies, which manages to devalue every business it touches (except healthcare).
If a product or service can be digitized it can be produced or offered, for nearly free. If a business makes money on something else it can easily support "almost-free" to the detriment of other "non-free" businesses in that market.
Stewart Brand, a Bay Area publisher and techno-optimist, coined the phrase "Information wants to be free" in 1985.
"Information can be free" -- is what he's actually saying. And because it can be offered for free -- it often is. And software too, the open source movement is a perfect example of that trend.
Mr Lanier is right about the need for developing sustainable businesses and the inability of free information to provide a means of wealth creation, especially when the competitive strategy du jour is the simple bludgeon of scale, who has the biggest computer platform.
But developing sustainable economies won't be done by going backwards in time. We face a future that will be defined by the end of work - it can become a golden age or one of horrific consequences. We have no means of dealing with this type of future, we have nothing that has prepared us for it, we only know how to punish and ridicule those that don't work.
It would seem a better use of their time if futurists such as Mr. Lanier focused on the future, and less on going back to the past.
We need to figure out how we deal with the end of work -- it's the most important problem we face bar none.
We have hugely productive manufacturing and other technologies. It doesn't require all 7 billion of us to produce the things we need for a sustainable, healthy, vibrant society. Yet we will impose austerities and false shortages to create scarcities in a bid to monetize markets.
We have at our disposal immense, irrepressible technologies of mass abundance, yet we constantly seek to muzzle them.
It doesn't add up, it doesn't make sense, and it's because we don't have the language and the concepts to even begin to know how to talk about living in a world that celebrates the end of work, the fruits of thousands of years of progress.
Yet we insist that 7 billion people work, or else they are failures, failed societies, failed countries, failed economies. The Internet is helping to create a lot failed economies, it's what it does best.
We need a new way of understanding the future and coming to terms with it on its terms -- and not those from our past way of thinking.
Predicting the future is easy, figuring out how we live in it is much harder.
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