Category Archives: Business and Economy

The 84,000 question

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I hadn’t had a chance yet to comment on the 84,000 websites the U.S. government seized about a month ago because they were supposedly associated with child pornography.  Turns out the government was wrong about that, but the damage was done since a lot of visitors to the websites of innocent small business owners were directed to a page displaying an imposing government seal and the statement:

Advertisement, distribution, transportation, receipt, and possession of child pornography constitute federal crimes that carry penalties for first time offenders of up to 30 years in federal prison, a $250,000 fine, forfeiture and restitution.

Whoops.

Recently, the White House’s IP Czar Victoria Espinel testified before the House Judiciary Committee, and Rep. Zoe Lofgren (D-CA) had a lot of pointed questions (YouTube video of the exchange here).  Now Ars Technica has posted an interview Rep. Lofgren in which talks about the due process problems with seizing domain names without giving people a chance to defend themselves before the seizure takes place:

You’ve got the prosecutors coming in, they have a judge sign something, and the people whose property is being seized are never heard from. It doesn’t appear, honestly—though it would not solve the due process problems—that there’s much inquiry on the part of the prosecution, either. Is there a fair use right? Is there an authorized use? Is there legitimate business going on? There’s no opportunity for that to be raised, and once the damage is done, it’s done.I’ve not yet talked to some of the individuals, but we’ve had second-hand reports of people in the child pornography takedown [i.e., who owned one of those 84,000 websites] whose businesses were essentially destroyed. There’s hardly anything you can say. It’s worse than accusing somebody of being a pedophile.

These are troubling developments indeed.  The whole point of giving the innocent-until-proven-guilty the chance to defend themselves before seizure is to help prevent these sorts of devastating mistakes from happening.

The iPad as magic

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Sales of Apple’s iPad have been impressive. Virginia Postrel argues that the appeal of the iPad is in its magic:

When Steve Jobs appeared on stage last week to unveil the iPad 2, which hit stores Friday, he said, “People laughed at us for using the word ‘magical,’ but, you know what, it’s turned out to be magical.”

Apple has long had an aura of trend-setting cool, but magic is a bolder—and more provocative— claim…

With its utterly opaque yet seemingly transparent design, the iPad affirms a little-recognized fact of the supposedly “disenchanted” modern world. We are surrounded by magic…

“Between a wish and its fulfillment there is, in magic, no gap,” wrote the anthropologist Marcel Mauss in “A General Theory of Magic.” Effortlessly, instantly, the magical alters reality with a tap of the finger or wave of the hand. Sound familiar?

This argument reminds me of Max Weber’s claims about the rationalization of the modern world. On a broader scale, Weber argued that bureaucracy, efficient for dealing with large groups of people, would lead to a “iron cage” where everything would be routinized. Postrel argues that even though the iPad is the product of modern bureaucracies (even Apple is a bureaucracy though it positions itself as the anti-bureaucracy, usually referring to Microsoft, with a charismatic leader), it is magic in that the user has little idea of how it all works, is unable to open it up and “look under the hood,” and it is like an extension of oneself.

This could be one explanation for the iPad as magic. There could be some other reasons as well: its size, the vibrant screen, the Apple brand, and its positioning as the most popular (and the first mass-market product?) of the burgeoning tablet market. Another explanation could be this: the iPad brings joy or happiness to its users in a way that many modern products do not. While laptops are often intended for work and new cars are functional transportation options, the iPad is there for enjoyment. In a disenchanted world, this is an re-enchanting product in the same way that the Microsoft Kinect (with its own impressive sales) is magical: it is meant to be used for fun.

Will the magic decline over time as more products offer the same possibilities? Probably. But for now, the iPad may have just cornered the short-lived market on magic and re-enchanting its user’s worlds.

Strong IP

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Techdirt points to a story illustrating how strong IP enforcement comes around after going around:

We’ve been talking about how ridiculously aggressive Sony has been lately in enforcing its intellectual property rights concerning PS3s, so it seems like there might be a bit of karmic retribution in the fact that a shipment of PS3s has been seized in Europe as part of an ongoing legal fight with LG over patents covering parts of the PS3. I’m always amazed at how frequently companies who push for stronger and stronger enforcement of IP laws never seem to consider the consequences when those laws are directed at their own activities.

There’s been a lot of talk this week about patent reform since the Senate passed a bill 95-5 that would, among other things, move the U.S. to a first-to-file system similar to what most of the rest of world uses.  Some commentators think the proposed statutory reforms wouldn’t amount to much, though others suggest that the FTC’s recent report suggest that administrative reforms may be on the way.

Microsoft is a place where sociologists could work

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Sociology majors are always wondering what kinds of jobs they might have in the future. I ran across an article that mentioned a talk by “Mark Smith, Research Sociologist at Microsoft.” With a little Google searching, I found an excerpt from a 2003 interview with Smith who describes how he ended up at Microsoft:

How did a guy like you get to work for a company like Microsoft?
I’m a sociologist. I’ve now been at Microsoft Research about four-and-a-half years. Microsoft has a few social and cognitive psychologists, but I’m the only sociologist.

Which means what, exactly, in the context of technology employment?
A sociologist studies the attributes of relationships and the group of relationships that add up to a collective or a community. As a technology group, our mandate is to both explore and to build tools to study the phenomenon that we could call online community. We sociologists don’t like to use the term “community,” particularly–we like to refer to them as social cyberspaces…

So why exactly does Microsoft need a resident sociologist?
Microsoft has a big investment in online communities, and has not had until recently many tools to enhance that investment. What Microsoft wants around communities is what every enterprise does, which is a peer-support, knowledge-management application. And that means that if you go into Usenet, you’ll find 3,000 Microsoft public newsgroups, with 1.5 million people posting 10 million messages. And that’s 2002–and it’s going to more than double this year, because it more than doubled in ’01. We don’t see traffic flagging at all.

Trained sociologists could be very useful to businesses and organizations who want to conduct their own research and see how potential customers or clients operate in the world. I remember reading an article years ago about Microsoft employing anthropologists who would live with (or spend extended periods of time with) families in order to see how the different family members would use the computer and Windows.

What would it take for more sociologists to convince organizations they can help add to their bottom line or help them reach their goals? Or what might it take for businesses or organizations to start seeking out more sociologists?

Rationalizing the economic costs of raising children

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Discovery News reports on two recent studies that look at how parents respond to information about how much it costs to raise children today:

New research suggests that people may exaggerate the perks of being parents to rationalize the financial costs of raising children.

Two studies, featured in the journal Psychological Science, measured more than 140 parents’ feelings after being presented with information regarding the hefty bill of raising a child. In the Northeast, raising one child to the age of 18 costs nearly $193,000, according to the research.

In one of the studies, researchers exposed half of parents to the overall costs of raising a child, while the other half received information about the costs as well as information suggesting that children care for and financially support aging parents later in life.

The team discovered that parents who were only exposed to the costs of parenthood (not the benefits) rationalized such costs by reporting a higher intrinsic value of being parents. The other group, which received information regarding the costs and benefits of parenthood, did not show an increase in rationalization…

These findings by no means suggest that parents do not enjoy parenthood or fail to love their children, but rather emphasize that parents are sometimes faced with conflicting feelings regarding the costs and benefits of having children.

It would be interesting to hear what it means to parents when they talk about “a higher intrinsic value of being parents.” Are there certain kinds of behaviors from children or experiences parents have with children where the economic costs end up outweighing “the intrinsic value”? How much can parents openly talk about the economic costs of children when it seems like a crass way to talk about their kids?

Fair comment

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A mea culpa note: I originally wrote this post about a week ago.  At that time, I thought that SF360 was moderating their comments and not approving mine, for reasons that I implied might have something to do with the policy position of my remarks.  I was wrong — there was an innocuous, technical reason that my comment did not post.  Thanks to SF360’s editor Susan Gerhard for helping me get my comment up, and my most sincere apologies to her and everyone at SF360.  I made a mistake, and I thank Susan for being so gracious in the way that she corrected me.

***

I made a comment recently on a SF360 article titled “What you Need to Know to License Music for Film”.  Here is the relevant bit of the article that I was addressing:

Licensing can be a complicated, frustrating process. Yet, the copyright owners have exclusive rights over the music and using the music in a film will generally not be considered a fair use. Therefore, to avoid litigation a filmmaker must acquire the necessary licenses before including any music in their film. [emphasis added]

As I wrote in my comment, this characterization of fair use is, at best, highly misleading:

George [Rush, who wrote the article] says that “the copyright owners have exclusive rights over the music and using the music in a film will generally not be considered a fair use.”  This is simply not true; there are a lot of uses of music in films — particularly documentary films — that can be considered fair use.  There is a Documentary Filmmakers’ Statement of Best Practices in Fair Use, and there are even companies that issue errors and omissions insurance based on fair use claims.

Before using any music in your film, you should definitely seek legal counsel.  But don’t assume that you *always* have to license music.  Despite the grumblings of music labels, fair use still exists.

George is right that the issues are complicated and that sometimes hiring a professional (like him) to help negotiate various music licenses is the proper way to proceed.  But that’s not always true.

Licensing theater

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Stanford’s Center for Internet and Society pointed me to a comprehensive study by the Social Science Research Council (SSRC) (Wikipedia backgrounder) on the effects of media piracy in emerging markets:

Based on three years of work by some thirty-five researchers, Media Piracy in Emerging Economies tells two overarching stories: one tracing the explosive growth of piracy as digital technologies became cheap and ubiquitous around the world, and another following the growth of industry lobbies that have reshaped laws and law enforcement around copyright protection. The report argues that these efforts have largely failed, and that the problem of piracy is better conceived as a failure of affordable access to media in legal markets.

“The choice,” said Joe Karaganis, director of the project, “isn’t between high piracy and low piracy in most media markets. The choice, rather, is between high-piracy, high-price markets and high-piracy, low price markets. Our work shows that media businesses can survive in both environments, and that developing countries have a strong interest in promoting the latter. This problem has little to do with enforcement and a lot to do with fostering competition.”

I’m looking forward to perusing the report, but there’s a threshold issue that I want to address:  SSRC has released the report itself subject to a “Consumer’s Dilemma” license:

[T]he CD license creates different paths to acquiring the report: first, we have an IP address geolocator that sends visitors from high income countries toward an $8 paywall when they download the report;  all other resolvable IP addresses get free access.  Second, and separately available, a ‘commercial reader’ license that costs $2000.

Why did SSRC set things up this way?  Licensing theater:

Maybe some clarification is in order here. If you are residing in one of the listed high-income countries, want to read the report, but think that $8 is an unreasonable price, you can acquire it for free through other means.  In fact, we have made it exceedingly easy to do so. If you fall under the terms of the commercial reader license but think that $2000 is unreasonable, you have the same options (plus the $8 option).  In both cases, the reader is faced with a dilemma: pay the legal price (roughly mapping ability to pay to a determination about whether the price is fair), acquire it through pirate channels, or don’t bother with it.  In most of the countries we’ve studied in this report, the results of this calculation with respect to DVDs, music, and software are strikingly consistent.  Media goods are highly desired, exorbitantly priced with respect to local incomes, and freely available through pirate channels.   High rates of piracy and tiny legal markets are the result. We’ve written 400+ pages about this dysfunctional form of globalization and its causes.

The resulting consumer dilemma is a ubiquitous experience in medium and low-income countries but one that confronts the American or European reader (or the media company employee conjured up by the commercial reader license) much less frequently and with much less intensity.  The global market is made for those consumers.  It is priced and distributed for them.  They are rarely faced with what they experience as ridiculous pricing for a DVD or book–or seriously disadvantaged by differential pricing.  The Consumer’s Dilemma license is a way of reversing that equation and, in the most minor ways,  requiring an explicit engagement with it.  Among the surreal aspects, that simple choice can subject you to crushing civil and criminal penalties, but you can rest easy knowing that only very rare, arbitrary examples will be made (and none in our case).  Now that’s theater.  Our license has a theatrical side, to be sure, but it also stays true to the experiences  documented in the report.

Well done, SSRC.  Now I’m really curious to read the report…

Update: TechDirt has posted an initial analysis of the report here.

The once (and future?) public domain

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According to SCOTUSblog, the Supreme Court has just agreed to hear a major case about the public domain:

The case involves a two-pronged constitutional challenge to a 1994 law, passed by Congress to implement the global agreement on trade in the so-called “Uruguay Round.”   First, the case tests whether the Copyright Clause gives Congress any authority to take a work out of the public domain — that is, to restore its copyright shield once that has expired.  Second, it tests whether the 1994 law at issue violates the free speech rights of those who, before the law was passed, freely performed or distributed works that had entered the public domain — such as Prokofiev’s Peter and the Wolf….The constitutional issues about the Berne Convention’s Article 18 on restoration were pressed in federal court by a group of orchestra conductors, educators, performers, film archivists, and motion picture distributors.  They contended that they have depended for years on public domain works, but were cut off from those opportunities when Congress restored a seemingly large number of U.S. copyrights for foreign works that never previously had U.S. protection.

SCOTUSblog is hosting a number of the related documents:

For a round-up of additional coverage, see:

  • PaidContent:  “Can You Re-Copyright Works That Fall Into Public Hands? High Court To Rule”
  • Patently-O:  “Copyright: Supreme Court to Hear Constitutional Challenge to Copyright Restoration”
  • Wired: “Supreme Court Deciding Whether Congress May Copyright Public Domain Works”

Stay tuned…

Might the 30-year mortgage disappear?

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An article suggests that the 30 year mortgage might “fade away.” As both Republicans and Democrats think about eliminating Fannie Mae and Freddie Mac, it is unclear whether a purely private mortgage industry would retain features like a 30-year payment period:

Life without Fannie and Freddie is the rare goal shared by the Obama administration and House Republicans, although it will not happen soon. Congress must agree on a plan, which could take years, and then the market must be weaned slowly from dependence on the companies and the financial backing they provide.The reasons by now are well understood. Fannie and Freddie, created to increase the availability of mortgage loans, misused the government’s support to enrich shareholders and executives by backing millions of shoddy loans. Taxpayers so far have spent more than $135 billion on the cleanup.

The much more divisive question is whether the government should preserve the benefits that the companies provide to middle-class borrowers, including lower interest rates, lenient terms and the ability to get a mortgage even when banks are not making other kinds of loans…

Hanging in the balance are the basic features of a mortgage loan: the interest rate and repayment period.

Fannie and Freddie allow people to borrow at lower rates because investors are so eager to pump money into the two companies that they accept relatively modest returns. The key to that success is the guarantee that investors will be repaid even if borrowers default — a promise ultimately backed by taxpayers.

A long line of studies has found that the benefit to borrowers is relatively modest, less than one percentage point. But that was before the flood. Fannie, Freddie and other federal programs now support roughly 90 percent of new mortgage loans because lenders cannot raise money for mortgages that do not carry government guarantees.

The issue of a 30-year mortgage would be up for debate within a broader restructuring of an important industry. Both organizations, Fannie Mae founded in 1938 and Freddie Mac created in 1970,  were intended to help Americans become homeowners. Fannie Mae, along with several other government programs, particularly helped to boost homeownership rates after World War II. During this postwar housing boom, government programs helped lower down payments and lengthened the years in a mortgage. If I remember correctly, mortgages prior to this postwar period were 15 or 20 years at most, required much larger down payments, and were available from mortgage lenders or savings and loans associations.

Where this article needs to go next is to ask whether this means fewer Americans will have access to mortgages and homeownership. If the industry is indeed restructured in the coming years, will the homeownership rate continue to drop? If politicians from both sides of the aisle are interested eliminating Fannie Mae and Freddie Mac, does this mean the federal government is pulling away from more explicit endorsements of homeownership? It is intriguing to note that all of this might take place because of a large economic crisis (though both of these programs have had their critics for decades) while Fannie Mae was instituted in response to an earlier crisis.

500 to 1

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I contemplated the effects of technological changes on law jobs several weeks ago when I posted a link to news reports about IBM’s Watson winning Jeopardy.  The New York Times has written what essentially amounts to a follow-up article, and it’s eye opening:

Quantifying the employment impact of these new technologies [that help automate the legal discovery process] is difficult. Mike Lynch, the founder of Autonomy, is convinced that “legal is a sector that will likely employ fewer, not more, people in the U.S. in the future.” He estimated that the shift from manual document discovery to e-discovery would lead to a manpower reduction in which one lawyer would suffice for work that once required 500 and that the newest generation of software, which can detect duplicates and find clusters of important documents on a particular topic, could cut the head count by another 50 percent. [emphasis added]

To be sure, 500:1 may just be the talking point of a businessman who is trying to sell his particular solution. Nonetheless, it seems clear that technology like Mr. Lynch’s is already fundamentally altering the economics of the legal profession.  We probably are headed towards a future with fewer lawyers (at least, ones performing discovery-related tasks).

What are some of the broader economic implications?  The NYTimes piece also quotes from  David H. Autor, an economics professor at the Massachusetts Institute of Technology:

“There is no reason to think that technology creates unemployment,” Professor Autor said. “Over the long run we find things for people to do. The harder question is, does changing technology always lead to better jobs? The answer is no.”