Why Automating Jobs is Like Pirating Content

As I’ve said before, I believe there is a fundamental similarity between the following two scenarios:

  1. A business fires workers and replaces them with robots or software.
  2. A consumer pirates content instead of paying for it.

Both situations involve using technology to get something for free or significantly cheaper.

Both involve an act of “copying.” A robot copies a worker’s skills. An illegal download copies data from an original file.

Both cases are decried using the language of theft. Robots steal our jobs. Pirates steal content. And yet neither automation nor piracy is very much like stealing when you think about it.

Both have uncertain economic effects. Opponents of piracy claim it destroys industries. Others claim that times have never been better. Some economists are concerned about the job-destroying effects of automation. Others think this a tired fallacy that’s been proven wrong time and again.

The evidence suggests that automation and piracy have been mostly harmless up until now. However given the speed of technological change, the future is very uncertain. Perhaps automation and piracy will follow the trajectory of previous technology trends, as described by the Gartner Hype Cycle and Amara’s Law. Meaning that our initial fears are overhyped and exaggerated, but that over time, the true impacts are going to be even greater than we could have imagined.

In any event, it is useful to line these two cases—automation and piracy—up against each other because the juxtaposition reveals potential biases. If we are going to demonize the downloader in his bedroom, perhaps we should also consider demonizing the owners of this automated Walgreens. Alternately we might consider celebrating both of them as triumphs of technology and accept that economic disruption is a fact of life.

Personally, I tend to be way less sympathetic to the content industry’s complaints about piracy than to the plight of workers facing automation. Most likely this comes down to me intrinsically caring more about what I conceive of as “the average joe worker” than a faceless movie or music corporation. Similarly, I have often voiced skepticism about the negative effects of piracy, while at the same time projecting relative certainty about the dangers of automation. Comparing automation and piracy has proven to be a useful thought experiment that has caused me to pause and reconsider my stance on both.

Is the Future Economy About Being Likable? Similarities and Differences Between Louis C.K. and Double Fine

Zachary Knight of TechDirt writes:

It’s often said that people will just get stuff for free if they can. But, clearly, that’s not true. We’ve seen so many cases of content creators being supported by their fans at tremendous levels that there’s clearly more to it. And it seems that a key element is whether or not fans actually like you. Some people suggest that the disconnect with piracy is that people value the work, but won’t pay for it. But a more accurate realization may be that people value the work… but don’t value the creator if the creator doesn’t value them. When the two sides value each other, it seems people are more than willing to pay.

At the moment such discussions are heavily focused on movies, music, and games. But as digitization marches forward, people are going to be able to get more and more varied types of goods for free. Education is a good example of a good that is currently in the process of being digitized and will soon join the ranks of potentially pirate-able goods.

And yet current examples suggest that if you are likable enough, people will still pay for your products anyway. At risk of extrapolating too far, can we imagine this as a basis for a future economy? One where we just pay each other money out of good will? It sounds a bit absurd, and maybe it is.

One problem with drawing too many conclusions from the current crop of examples is that piracy is still hard for a lot of people. There are a lot of less computer literate people out there who simply aren’t aware of how to use a technology like Bit Torrent. So I assume a certain portion of the people who paid for Louis C.K.’s recent standup special, did so because they didn’t know how to pirate it.

It’s debatable whether or not piracy will get more or less difficult in the future. But my money’s on piracy getting easier, in part because every day I see a new article like this. However an especially aggressive enforcement regime might have the effect of frightening and slowing down a lot of would-be pirates.

In any event, a big distinction exists between two examples currently being thrown around. The first one, the above-mentioned Louis C.K. special, involves selling a pre-made digital product. The second example, the Double Fine Kickstarter success, is a different beast altogether.

True, there are similarities. In both, you have likable superstars in their respective fields appealing directly to their fans. But the Double Fine case revolves around a “promise to create.” Double Fine is selling a true scarce good, not one that can be pirated. What they are selling, in effect, is a future game that would not otherwise exist without fan investment.

I think this distinction reveals a key feature of a digitally abundant economy. Once you release a product digitally, the genie is out of the bottle. You can’t control the sea of inevitable copies. You can still monetize the product after the fact, but not using traditional coercive means. You can only provide people a convenient way to support you and hope they will do so.

So another strategy is to time shift the digital sale to before the product release. This is essentially what Kickstarter does. The creator has a promising idea in his head that the fans want. The creator then ransoms the idea, saying “If you want to see this idea come to fruition, you will need to pay up.” Frankly, I think it’s a great model with perhaps more long term potential than the “please pay” Louis C.K. strategy.

Looking ahead, I think the reality of digital abundance will cause more and more creators to try selling a “promise to create” rather than a creation itself. This scenario favors creators with a proven track record, those who can reliably create new and appealing products on a reasonable time schedule. And yes of course, being likable certainly doesn’t hurt.

Will the App Economy Continue to Drive Job Growth? A Few Points of Skepticism

Much has been made recently of how the App Economy is a “job leader.” People are saying that the App Economy has “managed to create jobs during the worst recession since the Great Depression,” and has created 466,000 jobs since 2007. This is clearly good news, but I’m skeptical of the future of this App Economy to continue creating jobs. Here are some random thoughts:

  • Current App Economy growth is probably driven in large part by the the adoption of new mobile operating systems. Once the mobile market is saturated, App Economy growth may level off.
  • In an open app marketplace, apps compete against all other apps. This inevitably leads to the superstar effect.
  • As with other software, for every paid app there is likely to be a free ad-driven alternative, and for every ad-driven alternative, there is likely to be an ad-free alternative developed by amateurs. Digital abundance tends to drive prices down toward zero.
  • As computers increase in power, it will become easy to absorb many app features into other apps, or even into the operating systems themselves, possibly creating convergence towards just a few “everything” apps.
  • New creation tools will make it easy for ordinary people to quickly create custom apps and thereby lower the market rate of app developers. As an analogy, consider the plethora of easy-to-use blogging tools that exist today. Not long ago, building a robust blog would have required hiring a web developer, or at least learning a bit of programming. Building a simple app may soon be as easy as starting a blog.
  • Improved device and network speeds will allow the remote execution of app-style programs through your web browser, effectively bypassing the App Economy entirely.

Robert J. Sawyer: “Economics is how you rationalize the distribution of scarce resources”

Science fiction author Robert J. Sawyer does a good job in this video of succinctly stating a simple but profound point:

“We’re also burdened with this dismal science of economics which has driven so much of how we interact as people. But economics has always hitherto been the science of scarcity, it’s how you rationalize the distribution of scarce resources. What we’re going to see a transition to is the science of abundance. Economics will become the art of what you do when you have too much of everything, instead of too little of everything.”

In the video, Sawyer refers to the rise of nanotechnology. It should be noted that advanced nanotechnology is very speculative and may be a long way off. That said, discussions of such extreme tech are useful because they reveal just how antiquated our current economics is likely to become in the long run. But there is no way to magically skip to a fully abundant world. Nanotechnology indicates a general trajectory for our journey, but we must still pass through a lot of intermediate steps on the way.

The digital domain is a world of abundance, and here we already see the traditional economics of scarcity breaking down. The entire SOPA/PIPA debacle suggests the growing pains of a move from scarcity to abundance. Piracy is a problem of “having too much.” We are likely to experience a gradual and potentially bumpy transition as more and more resources move out of the scarce category and into the abundant category. Long before any theoretical “end” of scarcity, we are going to experience a decline of scarcity.

Abundance of Links — Digital Destruction of Textbooks, The Effects of Self-Driving Cars, Not Worth Stealing

1. Apple’s Plans to “Destroy” Textbook Publishing

“We know that former Apple CEO Steve Jobs was working on addressing learning and digital textbooks for some time, according to Walter Issacson’s biography. Jobs believed that textbook publishing was an ‘$8 billion a year industry ripe for digital destruction.'”

2. The Future of Car Tech: Efficiency, Automation, and Sharing

I’ve done a lot of thinking about self-driving cars but for some reason I overlooked the effects on insurance. Self-driving cars should very rarely have accidents, so one might expect a steep drop in insurance premiums?

“All told, the changes may not best the leap from horses to cars, but they are big enough to undermine many of the legal systems we rely on for things like insurance, not to mention criminal law. If a car doesn’t require a driver, can a 12-year-old “drive” to his friend’s house? Can a drunk person drive home from a bar? How will insurance work if people share driverless cars? Courts and legislators will be sorting those out for years to come.”

3. Physical Media Products are No Longer Worth Stealing

“Thefts of entertainment products like CDs and DVDs have collapsed in England and Wales, to the point that they are now taken in just 7% of all burglaries in which something is stolen (see chart). They are now targeted no more frequently than are toiletries and cigarettes.”

The Computerization of Everything: Or What Music Pirates Have In Common With Cut-Throat Employers

Two big trends have the potential to disrupt our economy:

  1. The automation of services (ex. robots or software doing jobs people used to do)
  2. The digitization of goods (ex. music becoming mp3s, 3D printers manufacturing objects from digital files)

Though these trends are not often linked in conversation, I think they are deeply related. In a sense, they are both part of the same bigger trend. Call it “the computerization of everything.”

For both issues, the debate is the same: What are the economic consequences of people getting something for free that they used to pay for?

Automation primarily benefits businesses. Since the goal of a business is to maximize profits, we do not expect businesses to pay for services they could otherwise get more cheaply. Thus we anticipate businesses will replace workers with robots or software at the first available opportunity. We might begrudge them their choice, but we are not surprised.

Digitization, on the other hand, primarily benefits consumers. Here the cultural norms are the opposite. We do expect consumers to pay for things, like software or music, that they could otherwise get for free. But why shouldn’t consumers, like businesses, maximize their consumption by seeking out as many pirated goods or free alternatives as possible?

Traditional economists will tell you neither automation nor digitization is a threat to the economy. It’s all just part of the normal process of creative destruction. New goods will appear to replace those that have been digitized. And new jobs and services will appear to replace those that have been automated. Up until now the economists have been right, and the doomsayers have been wrong.

However, I am quite fond of Amara’s Law which says, “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.”

Exponential progress in computing power means that both of these trends are accelerating. In addition, they may create a feedback loop.

If you automate away jobs, denying people a source of income, you incentivize them to acquire as many goods for free as possible. Unemployed people have more time than money, so the minor inconvenience of pirating something or browsing for a free alternative suddenly shrinks in importance. As a consequence, businesses may lose customers and turn to automating more jobs to make up for lost profits.

In the long-term, none of this is necessarily a problem. After all, what could possibly be wrong with free goods or robots doing all of our work?

The problem arises in the transition. It seems like automation may outrun digitization in the short-term. If that happens we will potentially have great political unrest. Imagine what happens if we automate away most jobs (and thereby people’s incomes) and we haven’t yet figured out how to digitize food? Or medicine?

Potential Intersection of Virtual Reality, Intellectual Property, and DRM

Over the last couple decades, many goods have become digitized. Up until now, the primary targets of digitization have been media goods like music, movies, books, and video games. Once a good is digitized it becomes extremely easy to copy. This ease of copying has big economic consequences, since a proliferation of copies creates a near infinite supply and pulls down the market price of the good towards zero.

In order to save the value of their products, industries attempt to introduce artificial scarcity. They use intellectual property and digital rights management (DRM) to prevent copying, thereby ensuring a limited supply and an above-zero market price.

Because of rapid progress in 3D printing, many people are speculating that soon more tangible goods like tools, toys, and even instruments will effectively become digitized. This means that many new industries will increasingly lobby for artificial scarcity. For example, if you are a toy manufacturer, suddenly you will need to defend your intellectual property not only against overseas counterfeiting operations, but also against domestic consumers armed with desktop 3D printers and some cheap raw materials.

But we can take this thought experiment even further. Experiences represent another good that may soon become digitized. You purchase an experience when you go to a golf course, when you visit a museum, and when you go to a concert.

All that’s needed to digitize experiences is really good virtual reality. This already happens to a degree. We have golfing video games and live concert videos. Both of these technologies attempt to take an experience and compress it into a smaller, cheaper, and more portable form. However, this compression is far from lossless. A golfing video game does not capture the feeling of a 9-iron or the smell of grass. And a concert video does not provide 360 degrees of visuals or opportunities to meet other concert goers.

Improved virtual reality could potentially solve these problems. Granted some senses are easier to digitize than others. Our ability to digitize sound and visuals is far ahead of that for the other three senses. But just immersive sound and visuals have the potential to duplicate much of what is fun about a lot of experiences. Moreover, if the virtual space were shared and populated by other virtual reality users, than you could reproduce an important social component to many experiences.

Again, we see this sort of thing happening already, with video games on the leading edge. But while there’s nothing new about this idea, there is not a lot of discussion of the fact that virtual reality might increasingly compete economically with real experiences. For example, the music industry realizes it can’t make much money off of selling records any more, so they have started focusing on other revenue streams like live shows. And this works because right now I don’t think there are many fans who watch a youtube video of a band playing live and think “Great, now I don’t need to spend $25 and go see them.” But one can imagine that if virtual reality technology made a few large (but very conceivable) leaps forward, this equation might start to shift.

Keep in mind there are two steps to any digitization process: the scan/record step and the print/playback step. Both are critical. So when I talk about better virtual reality I am not just talking about the print/playback step—things like 3D goggles, surround sound, tactile feedback, etc. I am also talking about big advances in the scan/record part of the process. Advances that might make it possible to say, stroll through a theme park and surreptitiously record the experience itself. And I don’t just mean record the experience in a linear manner. I mean record enough salient details about the geography that a sufficiently advanced algorithm could then use that data to create a digital model of the park’s layout. Now imagine that as other people walk through the park, some of them are also recording and uploading details to help improve the quality of your model. Pretty soon you have a digital file somewhere that in some senses is a copy of the whole theme park, ready for illegal file sharing. The virtual theme park might be missing some details, like the smell of churros, but such deficits would be only a few technology cycles and software updates away from being corrected.

People who make it their business to charge for experiences are not going to take such developments lying down. They too, like the media industry before them, will likely turn to policies of artificial scarcity in order to prevent such unlicensed copying. Increasingly places might ask you to check your cell phones or other portable computers at the door, because that’s the only way they’ll know for sure that patrons are not illegally scanning the premises. More likely they will attempt a DRM solution, and use some sort of localized jamming device to try and cripple your logging equipment. Or they may—and this is the most concerning—try to expand the definition of intellectual property to cover experiences themselves.

“Abundance” and “Radical Abundance”: Upcoming Books By Peter Diamandis and Eric Drexler

The new year promises the publication of new books by both Peter Diamandis and Eric Drexler. As evidenced by the similar titles, both books deal with the idea of an abundant future, a common theme on this website.  Although I don’t expect the main focus of either book to be the economic effects of such abundance, it is clear that both of these men are anticipating big shifts in the nature of society.

1. Diamandis’s book “Abundance: the Future is Better Than You Think” will be available on February 21st. On his website he writes:

“We will soon be able to meet and exceed the basic needs of every man, woman and child on the planet. Abundance for all is within our grasp. This bold, contrarian view, backed up by exhaustive research, introduces our near-term future, where exponentially growing technologies and three other powerful forces are conspiring to better the lives of billions… An antidote to pessimism…” (link)

More directly related to the topics of this website, Diamandis had this to say about some of the occasionally negative reactions people have to his message:

“Generally humanity hates change. We love waking up in morning and knowing that the world is the same way it was the night before.. But, what’s really going on is that the rate of change is moving so rapidly that there is the seeds of revolution being planted in all kinds of ways…

Whether it’s robots that’ll be coming online that can displace massive numbers of jobs, or artificial intelligence coming online that can displace jobs or create new opportunities, whatever it might be, huge change coming that people don’t like. So that’s the resistance that people have to the predictions being made, because if they’re true, it disrupts their comfortable way of living.” (link)

2. Drexler’s book Radical Abundance, also scheduled for 2012, will address possibly imminent advances in nanotechnology. A glance though his list of book topics also suggests a broader discussion of the large societal consequences of such radical technologies. He plans to cover:

  • “The nature of science and engineering, and the prospects for a deep transformation in the material basis of civilization.
  • “Why all of this is surprisingly understandable.
  • “A personal narrative of the emergence of the molecular nanotechnology concept and the turbulent history of progress and politics that followed
  • “The quiet rise of macromolecular nanotechnologies, their power, and the rapidly advancing state of the art
  • “Incremental paths toward advanced nanotechnologies, the inherent accelerators, and the institutional challenges
  • “The technologies of radical abundance, what they are, and what they will enable
  • “Disruptive solutions for problems of economic development, energy, resource depletion, and the environment
  • “Potential pitfalls in competitive national strategies; shared interests in risk reduction and cooperative transition management
  • “Steps toward changing the conversation about the future” (link)

In a recent interview with H+ Magazine, Drexler was explicitly asked about the potential economic disruptions caused by a shift away from scarcity. His response:

“A world with [atomically precise manufacturing]-level production capacity would remove some of today’s constraints on economic scarcity, but also change the organization of production. The production of physical products has parallels with software, where the information content of the product — the design — becomes the most important economic component. The requirements for raw materials point to a potential for production at a surprisingly low cost. As I mentioned in answer to a question similar to this the other night, I think we need to begin a more serious conversation on the implications of this kind of technology, and to explore scenarios that lead to a different kind of future from what’s now expected. To date, the technology has progressed faster than the dialogue regarding expected consequences and their policy implications.

To find out whether the technological optimism of either of these men is warranted, we will have to wait and see the evidence they present. At the very least, I hope the increasing number of such books will stir greater conversation about technological change as something other than an apocalyptic force. I also hope that if an abundant future arrives, we embrace it and don’t, as Diamandis suggests is in our nature, react with fear and resistance.

Louis C.K.’s Experiment and What It Might Mean

Perhaps you’ve heard the news about comedian Louis C.K. latest standup special. If not, here’s a quick summary from the New York Times:

“Louis C. K. decided last week to go direct with his fans: no cable special, no middleman, just a simple download for $5 on his Web site to see his comedy show “Louis C. K.: Live at the Beacon Theater.” The show could be viewed as the consumer wished, with no rights protection or expensive subscription. A buy-it-and-watch-it proposition, no cable company involved. He was also, of course, enabling people to watch it free — without digital rights management, it was there for the pirating — and some went right to the torrent sites and did so.” (link)

Since Louis himself has called this release “an experiment”, I thought it would be appropriate to treat it as such and see what conclusions can be drawn.

One conclusion you might draw is that Louis C.K. is a really smart, forward thinking guy. You’d be right of course, but since that conclusion isn’t all that enlightening, I’d like to momentarily give Louis his due and then quickly move on.

Another conclusion might be that this is “the future” of media distribution. Certainly if you take the old corporate model and compare it to Louis C.K.’s self distribution strategy, the latter looks a lot more appealing.  After all, Louie C.K.’s strategy is working. After twelve days he’s already surpassed one million dollars in sales.

Of course Louis is not the first to figure this out. Radiohead did something very similar with the release of In Rainbows. And there have been plenty of other pioneers, such as science fiction author Cory Doctorow and the game designers who participate in the Humble Indie Gaming Bundle. Louis is just one of the first prominent comedians to try this sort of self distribution. Which is evidence of this business model actively spreading into new art forms.

So let’s dissect this new model:

First of all, it assumes the absence of strong piracy controls. For the last decade we have watched the record industry, Hollywood, and other content owners flailing wildly in a losing battle to defend their intellectual property. Their latest desperate attempt—the SOPA and PIPA bills currently being debated in congress—is generating massive resistance.  But although people recognize how bad the specifics of SOPA/PIPA are, I think we should consider a much more general truth: namely that any enforcement of intellectual property involves problematic trade-offs. This is because by definition protecting IP requires inserting onerous surveillance and censorship capabilities into the network. So while it might someday be possible to architect a piracy-free internet, there will almost certainly be collateral damage in the areas of privacy, freedom of speech, and innovation.

In any event, the currently reality is one where piracy thrives. And if you go the self distribution route (which means you don’t have an army of corporate lawyers at your disposal) you are going to have even less recourse when it comes to people illegally downloading your product.

Since self distributors of media products can’t stop piracy, if they are smart they adopt a non-coercive stance. Essentially the creator goes directly to the fans and says, “Hey I know you could just pirate this and get it for free but could you please just do me a favor and pay for it anyway?”

It’s kind of like public radio. Or busking.

While Louis CK’s experiment has been wildly successful, there are a couple key points we should acknowledge:

  1. Louis CK is a huge star with an already established fan base. This model won’t necessarily work for just anybody.
  2. Self distribution is still a novelty. So there’s a certain amount of automatic good will engendered by the fact that “Wow, someone famous actually gets it.”

Of these points, number (1) is more obvious but (2) is perhaps more important.

It’s very cool to see Louis C.K. play the role of pioneer, but when the next comedian tries this route will it lose some of its luster? What about when every amateur and professional in the field is doing it? Will fans get burned out? Or at least less impressed? As in: “Oh wow, here’s another comedian graciously asking for my five dollars. What else is new?”

This might sound like a small concern, and perhaps it is. But my bigger point is really this: Such issues of cultural perception are extremely important, because if you break it down, self distributors really only have three forms of leverage at their disposal:

  • Convenience
  • Guilt
  • Good Will

All of the best self distribution campaigns have understood these three forces and exploited them to great effect. Louis C.K.’s special is a great example. The meager five dollar price tag, the friendly web interface and its colloquial suggestion that you “buy this thing”, all these touches are attempts to make buying the special comparably convenient to pirating it. Though of course you can’t please everybody. One commenter on btjunkie writes:

“Let the record show that I’m only torrenting this because there isn’t a credit card option on his website. I love ya Louie, but I fucking HATE PayPal.”

The use of guilt requires a more gentle touch. Originally, Louis C.K.’s website contained a subtle phrase along the lines of “please don’t steal this.” But perhaps fostering guilt is a task best left to your fans. Another commenter writes:

“Go to louisck.com and [buy] the fucking [thing] for a crappy 5. Don’t be dick.”

As for generating good will, what better way to keep the party going then to publicly give more than a quarter of your earnings to charity?

Thus the modern self distribution model doesn’t rely on DRM, IP laws, or physical limitations like scarcity. Instead it relies purely on psychology and cultural norms. As such, the cultural norms that society adopts, about when it’s right or wrong to pay for something—these norms will be incredibly decisive going forward.

And it’s going to be an ongoing struggle. Creators are going to have to fight to keep their distribution platforms as convenient as possible. They are going to have to constantly find new ways to foster good will. And they may need to harness the power of guilt and find ways to shame the “freeloaders” who would pirate their content.

Ultimately this cultural battle will extend well beyond the world of media. Louis C.K.’s new stand up special is an information product. What information products have in common is they are easy to copy, cheap to distribute, and as a consequence easily pirated.

Whereas today information products are limited to things like books, music, and software, in the future more and more goods are going to become information products. For example, developments in 3D printers might make it possible to illegally download a digital file of a Sears wrench or a Marvel action figure, and then print it out using a desktop device and some cheap raw materials. Moreover, developments in virtual reality could transform even experiences into information products. While there will always be some premium to “actually being there”, if you could experience a band’s concert with surround sound and 360 degrees of visuals for far cheaper than the cost of a ticket, you might seriously consider such an alternative, right? These are just a few examples, and not even very imaginitive ones. The actual future is likely to be even more surprising. But I see no theoretical reason why over time all products can’t become information and be subject to these same issues.

In any event, I’m hopeful the future will look more like Louis C.K.’s standup special and less like SOPA/PIPA. To finish, I’ll leave you with this ad copy from Louie C.K.’s website:

“I never viewed money as being my money. I always see it as “The money”. It’s a resource. If it pools up around me then it needs to be flushed back into the system. If I make another million, I’ll give more of it away. I’ll let you know what happens because I like you getting to know what happened to your 5 dollars and bringing awareness to the bla bla bla.”

Talk about engendering good will in the era of Occupy Wall Street! If the future of media sales depends on one’s rhetorical powers, I’d say Louis C.K. is well prepared for that future.