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Salting the earth

February 13, 2009

The one good thing about being on antibiotics is I sure can sleep – 8 to 9 hours instead of my usual recent 5-6.  Insomnia definitely gives you time to write, though, so only time for a short lunch post today.  I’m doing a bunch of contract work in the next three weeks, so will hardly be home in that time.  I’m resolved to keep blogging, and reading, as much as possible during these trips, though I’m afraid that may be about as likely as my resolutions to eat right when traveling for biz.  So since I’m on a plane Monday, my resolution is to finish chapter 2 by Sunday morning and post it, as there will definitely not be “fiction time” until after all this travel.

Two items that caught my eye in the last two days.  The first was an article on about a iPhone developer who’s managed to make $600,000 on a game he developed for the iTunes Store – $37,000 in a single day.

Until recently, there has been no realistic way for individual programmers to make serious money on their own. Most of the software market is dominated by big companies, and the traditional distribution method for independent developers — shareware — isn’t conducive to striking it rich. By contrast, Apple’s iTunes App Store provides a platform for marketing, selling and distributing software; all a developer needs to provide is a good idea and some working code.

When iShoot launched in October, business was slow for a while. And then Nicholas found some spare time to code a free version of the app — iShoot Lite, which he released January. Here’s how that helped: Inside iShoot Lite he advertised the $3, full version of iShoot. Users downloaded the free version 2.4 million times. And that led 320,000 satisfied iShoot Lite players to pay for iShoot. The game soared to the No. 1 spot — and it stayed there for 26 days.

So free leads to paid, which is the dream for all of us out there creating.  But the advantage that this programmer had is that he’s working within a closed system – as far as I know, iPhone games aren’t being cracked and copied freely.  You have to have a iPhone, and a carrier, and Apple “knows” which programs on your phone you’ve paid for and which you haven’t.  So if you want the product, you have to pay for it.

This sounds like a digression, but give me a minute.  I also stumbled on this book through Reddit, Against Intellectual Monopoly, by Michele Boldrin and David K. Levine, from Cambridge University Press – rather startling, considering one of the more poorly thought out ideas I found in the “How Competition Works” chapter, the only one I’ve had time to read, which is supposed to lay out “How would artists and innovators get paid without copyrights and patents?”  If I have time, I’ll write more about it.  There are a lot of false analogies of ideas to “trees” and “seeds,” as if books and ideas were self-replicating and self-renewing like plants.  More than once they make statements like “Copies of ideas are always limited, and it is always costly to replicate them” which is patently false when it comes to MP3s, for starters.  But this one really got me (emphasis mine):

The goal of economic efficiency is that of making us all as well off as possible. To accomplish this producers must be compensated for their costs, thereby providing them with the economic incentive of doing what they are best at doing. But they do not need to be compensated more than this. If, by selling her original copy of the idea in a competitive market and thereby establishing the root of the tree from which copies will come, the innovator earns her opportunity cost, that is: she earns as much or more than she could have earned while doing the second best thing she knows how to do, then efficient innovation is achieved, and we should all be happy.

So are we going to set an “industry standard” rate at which creators are to be compensated per hour? Will we need to fill out time cards to ensure we are only compensated for our “costs”? If the products of our labor automatically belong to “the people,” how is this not Communism, or is Communism okay?

Which brings me back to the iPhone and its apps.  In the system described in this book, the man who builds chairs is more incentivized than the man who writes software, because the man who builds chairs can continue to charge a set price for each chair, however exorbitant, regardless of his “opportunity cost,” if the market will bear it.  Whereas the man who builds software is paid only once for the product he’s created with the skills he’s perfected. The man who builds chairs can build each one faster than the last, as his skills improve and he finds better and cheaper ways of producing, without diminishing the value of each chair.  But the programmer is expected to start from scratch, to design a new chair each time he goes to work, to develop and test and market a whole new product each time, and be paid only once whether one or one billion people use his product.

So the real question becomes, how does a system in which all duplicatible intellectual property is free incentivize progress?  In abstract capitalism, the more of something you produce, the lower its cost, but this isn’t true in reality capitalism: the production cost of an Hermes scarf goes down, but the price doesn’t as long as there are people willing to pay it.  Supply and demand come into force, but as long as there is demand for the supply at a high price, the production cost is N/A.  Where, then does the “rational actor” go into business?  Hardware, of course – the product that can’t be copied by someone else with 1/1,000th of the effort required to create it.  The price of Apple computers hasn’t gone down to match the prices of PC clones, because it doesn’t have to.  So you remove the incentive to create easily copied and duplicated items like music, software, or novels.  Instead, you create software that’s so expressly tied into a hardware platform that it enjoys the non-duplicatible benefits of the hardware.  You send innovation back to a feudal state because only within the walled castle of the closed, hardware-dependent system can you make a living. 

As I’ve said before, I think open source is great, open access is great, I’m putting this novel out there for free as I go – but there has to be financial incentive for any open source/open access movement to succeed.  In Open Source, you hand out the software for free, but make your money on contract/consulting, writing “For Dummies” books, etc.  In Open Access, you’re handing out research for free, but the authors (who weren’t making anything off publication anyway) are compensated by research grants and university salaries for their work.  I’ll be damned if I know how I can monetize my project, but that’s part of figuring it all out.  A system in which varying levels of success in IP fields are all rewarded equally is not, in my experience, compatible with human nature.

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