Anarchy is not this society

[liberty_student]

@PeterWellington

You spend a year developing a piece of software. Aside from your time and energy, you’ve invested $100,000 of your own money. You release your software, completely unprotected, selling at a price of $100. Within an hour, someone has lifted all of your marketing material and is now selling your software for $5. What do you think your return on investment will be? Would you do it all over again? What do you think the market for software would look like under such conditions?

I see this happen all of the time online. But the competitor doesn’t sell for $5. He sells for free. And still the companies make a profit and continue to produce software and innovations. Without going through the entire model, I’ll simply say this. If you can’t provide more value as the originator than as the thief to make up the difference (assuming you have similar production and distribution costs) then you should have worked on something else, because your investment was wasted, your time misspent and your own creativity overvalued.

If any Joe Blow can copy your product, reproduce it 20 times cheaper than you, and provide the same or better support, documentation, upgrades etc, your model wasn’t unique enough to command the investment or selling price you thought it would.

I’m going through something similar with friends of mine who “invented” a product, spent $250,000 getting it to market, to only find out that the market is $10,000 in gross sales a year. All they looked at was scaling up the returns to wealth in less than 2 years, not judging the size of the market, or the competition, or the costs or anything else.

I don’t care if you spend 1 million hours and $10 trillion dollars. The bottom line, is that the market can recreate your “value” for less than $5 and still make a profit. That’s what it is actually worth once it leaves the creative phase. That’s why there is a difference between the quality of some ideas and others.

Btw, I am all for licensing. I have no issue with that. I have no issue with enforcing licenses. But if your product isn’t very good, or your pricing is out of whack, or the market won’t bear the inconvenience (however much that is), or someone else can make your product better by refinement or adding value, all of the contracts in the world won’t keep you in business.

[JParker]

LS, how can you be for licensing a product’s design when you dont recognize that the design is property? You’re licensing something you claim doesnt exist.

And in the end, the ‘creative phase’ you reference isnt free. Thus, it will always be cheaper to copy a complex product than to create it. Thus, who would spend time creating? You’d only have companies that exist by stealing other’s ideas, until there’s nothing left to steal. The definition of… a looter.

[Spideynw]

I find the OP laughable.

IP is not property. They are government granted monopolies.

If they really were property, then no one would have an objection to letting people keep them for eternity, just like real property. Not only that, but how can it be “property”, when only the super rich can afford the legal defense of it?

A free society would understand that they are public domain, just like the air you and I breath is public domain. There would be no way to enforce patents or copyrights, for the same reason no one would be able to have any monopolies in a free society, competition.

[liberty_student]

@JParker

To make money. To earn a profit by providing people with a convenience or luxury they otherwise wouldnt have had. Or to provide the same convenience or luxury value to themselves.

Well of course they did. But they didn’t need or exercise intellectual property rights to initiate the creative exercise, or to produce it.

There was no monopoly on the wheel, and yet someone invented it. Go figure..

@JParker

Who made you the arbiter that determines which things that are scarce merit reward in a free market? I thought the market determined this.

Actually, I was just illustrating that your point about uniqueness being rewarded was false. If something is unique, it can be owned. It doesn’t follow that uniqueness equals profit.

@JParker

I claimed no right to reward, only the right to own my brain power. If my ideas are worthless to the market, I lose money. But they’re still mine. It’s illogical to argue that I own my body, and the physical end result of my mind’s creation, but not the step in between. Why?

So if you have an idea for a machine, but you can’t make it profitable, mankind should be denied the ability for someone else to make it profitable, because it’s your idea and you won’t share?

How do you reconcile that two people, isolated from one another, can come up with the same idea or solution? Where does ownership fall? Because if there is only one owner, then the other person must have stolen the idea, right? But if they are on opposite sides of the world, more than a half dozen degrees of separation, how could one person possibly “steal” someone else’s idea?

It goes to the silly notion that you own your reputation. You can’t own what other people think, any more than they can own what you think.

@JParker

True, I’m sorry I asserted such. Take your definition of physical property, and add on original industrial design, writings, and art. If I had a perfect answer I would have given it long ago, and I’m sure you’ll find a thousand holes in my hastily created definition. My contention is the market would create the definition, but your claims that none of these can constitute property is logically fallicious.

My definition of physical property? Hunh? That’s not an answer at all.

You have to prove that my argument is fallacious. Just saying it, is not a proof. That’s what ML does.

My definition of property is that it is scarce (can only be owned by one person at a time) and the product of mixing labour with nature. Very simple.

Now again, I’ll ask you again, what is your definition of property?

[CurtHowland]

@PeterWellington

My example of the hypothetical software venture was posed as a mental exercise, not to say what people should or shouldn’t do, or that anyone owes anyone anything in that situation.

Ok, I just pointed out that your hypothetical happens every day already.

I’m asking you to look at the industry as a whole and what you think might happen if a company like Adobe left a program like Photoshop wide open.

I don’t use Photoshop. I use the GIMP. It’s wide open, go look for yourself.

It’s interesting you suggest “Look at what happens right now”. I am, are you?

Every day.

Can you tell me about the profitability of commercial software vs. open source right now? To be clear, I’m not knocking open source, I think it’s great actually. But as a business model, commercial software is greatly outperforming open source on the whole. It’s not even close.

Irrelevant. The proposal was that software would not be produced without patent and copyright. I use OpenSource as an example of software being produced, right now, that people are making money producing, supporting and using.

The fact that lots of money can be made utilizing government granted monopolies has never been in dispute.

You can argue that this is because commercial software is protected by government law, but then I would ask you what’s stopping the open source community from competing?

In what way, good sir, are the NOT competing? Just because RedHat doesn’t make as much money as Microsoft? Let’s see what your next sentence says…

There are certainly no laws forcing people to pay for Photoshop instead of using Gimp for free, but which has been more profitable?

It does seem that your measure of “success” is limited to quantities of dollars.

I’m saying explore the profit motive in the industry and what that incentivizes people to do.

Those incentives are very well known. So long as there is a government to fall back upon, there is huge incentive to utilize the limited liability and power of the state for personal gain, in supporting an otherwise inefficient business model.

I don’t see any reason to support coercion just because someone made a big profit from it.

[liberty_student]

@JParker

LS, how can you be for licensing a product’s design when you dont recognize that the design is property? You’re licensing something you claim doesnt exist.

Where did I say that I was licensing the design? The license is to support, upgrades and a warranty. I can’t warrant someone else’s copy, but I can warrant the ones I sell. The licence is just title to adding value, even if it is a plain as “acknowledgment of purchase from source X which claims to be the originator”

@JParker

And in the end, the ‘creative phase’ you reference isnt free. Thus, it will always be cheaper to copy a complex product than to create it. Thus, who would spend time creating? You’d only have companies that exist by stealing other’s ideas, until there’s nothing left to steal. The definition of… a looter.

You can copy the product, but you can’t copy the support. The knowledge or experience behind it. In some cases, you can protect the source.

Again, your notion that people would only steal is silly, because we have thousands of years of history to the contrary. There was probably a lot of idea poaching in the renaissance and that didn’t stop lots of science and art from being produced.

[PeterWellington]

@liberty student

A labour-time-capital theory of value fallacy. “I put X in, so I should be able to get X out”. Rothbard iirc has a good talk where he talks about a guy who designs and builds something in isolation, spending a lot of resources, only to find that it’s already been invented, improved and mass produced.

Whatever you spend in a commercial project, is only what someone will pay you for it. Not what you invested. This is market theory 101, knowing how prices are set.

Completely agree

@liberty student

Another issue is the notion of property. What can and cannot be owned. There doesn’t seem to be a consistent idea of what property is or any differentiation from labour. Kinsella makes this point in the video I linked up thread. Your labour is not property. You are your own property. The result of your labour is property. But the act of doing, is not something that can be owned.

Agree again, although I’ll say I think intentionally copying someone else’s work and re-selling it is a pretty lousy thing to do.

@liberty student

And lastly contracts. There seems to be this notion that whatever can be put in a contract, makes it valid. Of course this is not true, and it’s statist-type behaviour to believe so. That an edict supercedes reality. That with enough edicts, everything can be ordered. That when issuing edicts to enforce an agenda, market demand can be ignored. If the law, economic policy etc are contracts, implemented as edicts (by fiat, without negotiation or consent) then this is the essence of the calculation issue. And ties back into issue one in this post.

I agree with most of this, but I think the nature of contracts is probably the source of our disagreement. What constitutes a valid and enforceable contract? Should contracts have the ability to restrict behavior? Can you comment on my nuclear weapon example from earlier in this thread? I want to address what you said about the calculation problem:

Let’s say I leave my software product completely open in terms of protection and make $1,000/month selling it. Let’s say I implement a simple licensing scheme where a user needs a serial number to unlock the program. It costs me $500 to create this system and $100/month to maintain it. My software sales immediately rise to $2,000/month. The next month, I spend $1000 to create a very restrictive activation scheme and add several onerous restrictions to the license agreement. My sales decrease to $1500/month. I would say it’s rational to drop the restrictive scheme and use the simple one over no protection at all. In each of these cases I have direct and meaningful feedback, something socialism does not have, and I’m not forcing anyone to purchase my software. It’s true that I can’t know the extent to which these changes affected my sales because I can’t know what would have happened otherwise, but the same is true for something like a marketing campaign or any other business activity. I can still make educated decisions and the businesses that make the best decisions will be rewarded.

[Klor]

@JParker

And in the end, the ‘creative phase’ you reference isnt free. Thus, it will always be cheaper to copy a complex product than to create it. Thus, who would spend time creating? You’d only have companies that exist by stealing other’s ideas, until there’s nothing left to steal. The definition of… a looter.

If such a large amount went into R&D, then find a way to offer incentive to your customers. With the iPod, you have the convenient iTunes compatibility, which apple could restrict to just the iPod, rather than use with other mp3 players in order to ensure an increase in sales. As soon as cheaper competition arises, perhaps Apple could have pre-planned the release of custom-artwork plates for their iPod (waiting for competition to arise before releasing them), allowing for people to submit any sort of artwork or design to the company, only to see it printed in high quality on their iPod casing. T-Mobile’s Sidekick cell phone offers this, I believe. Even if cheaper competition arises for the iPod, Apple will always have the advantage since they have been marketing longer and hopefully smarter. More surprises could be planned by Apple–perhaps as soon as competitors arise, a price drop occurs, along with offering the device in seven more colors, or whatever.

The entire time, the customer is more likely to purchase from the producer who they are familiar with (via marketing) and trust (via marketing and prior use), which would be Apple in this case.

The market WILL compete, especially the original producer. If this sort of thing is to be expected within a free market, then you have to remember that this will be the norm. That means that people will already planning on this, and the producers will be offering the maximum amount of incentive with the most convincing marketing. Somebody selling the device for $5 (which is the number I believe you used previously) will not be marketing much, if at all. Remember, in order to sell it for so much less, the cheap-o competition will be offering very little incentive.

Edit: damn, I’m slow. finally finished my response and there are five new ones to look at.

Edit 2: Warranties are another incentive I forgot to mention. In order to maintain low costs, competition will only offer a very short warranty, if any at all. The original producer usually offers a very good warranty, which many people always consider to be worth the money, since the unexpected always seems to occur.

[liberty_student]

Peter, at the end of the day one can cripple their product, absolutely. I just don’t think it is good business.

In my experience, delivering the most value at the lowest price is typically how success occurs. You can charge more for more value (although there will be a smaller market for it), but you will not survive providing the same value at a higher price. At least, you will not thrive.

Your $100/$5 model, presumes value is equal. In that case, your production and creative costs are too high. Maybe you should have hired someone more skilled to handle production, and maybe taking your creative to market wasn’t cost effective. Certainly I think you will agree, that while it took you “X” hours and $X dollars, that doesn’t mean someone else couldn’t have done it for less.

Just an observation, I find everyone is protectionist of their own ideas, job, wages, prices. However, when they are the consumer, it’s the other way around. We’re always operating in self-interest, but I think it is wise to acknowledge that we (mankind) can be quite hypocritical.

[Klor]

@liberty student

Just an observation, I find everyone is protectionist of their own ideas, job, wages, prices. However, when they are the consumer, it’s the other way around. We’re always operating in self-interest, but I think it is wise to acknowledge that we (mankind) can be quite hypocritical.

A wise and accurate observation. As one who makes money from IP, I can say that, as a customer, I am quote “hypocritical” in that I act the opposite of the way one would immediately presume that I would act. I still have sympathy for those who make money through IP on an individual basis (rather than a corporation) and have the tendency to support them more heavily, though. (rephrased: I try to support the independent community as much as possibly when it deserves it). I still “steal” stuff, as some would like to call it, though. Or I sometimes buy from the cheapest supplier. But not always. It always depends on the situation and my options.

[PeterWellington]

@CurtHowland

Can you tell me about the profitability of commercial software vs. open source right now? To be clear, I’m not knocking open source, I think it’s great actually. But as a business model, commercial software is greatly outperforming open source on the whole. It’s not even close.

Irrelevant. The proposal was that software would not be produced without patent and copyright. I use OpenSource as an example of software being produced, right now, that people are making money producing, supporting and using.

You’re really putting words in my mouth. Point me to where I said a patent or copyright is needed or that open source software couldn’t exist on the market. I’ve said the opposite in fact.

My challenge was for you to show me that the open source community is fulfilling all of the wants and needs of the market. To do that you’d have to show me that commercial software is a failed business model. And if you think profit says nothing about the success of something, I’d ask how you feel about Austrian economics. And you do know that many open source packages actually come with contractual restrictions, right? Or are you against those as well?

The bottom line is this: Many people choose to pay for commercial software instead of choosing to use open source software for free, and there’s no law that stipulates they must do this. There’s also no law that prevents open source software from producing alternatives. The fact that people choose to pay for commercial solutions indicates that the open source community is not fulfilling all of their wants and needs. This is basic economics.

Stop calling it force or coercion. Some people may have said that, but not me. I’m not calling for either. If you keep repeating that then show me where I said it.

[hayekianxyz]

@JParker

You are claiming ownership of me by saying I cannot sell myself into slavery. You are limiting my action, actions which would have no adverse effect upon you. Thus, you are enslaving me, ‘forcing’ me to be free.

Perhaps you’ll stop with the selective quoting and we can begin debating properly. One must wonder why you resort to such dishonesty. As for the rest, it’s a strawman. I’m not limiting your action, I’m saying that no arbitrator would uphold such a contract because it isn’t legitimate, you’re more than free to follow it as if it were however.

@JParker

Your argument = socialism:

Socialism) The rich are only one person, with a dubious claim to wealth stolen from the masses. Anyone could have built that industrial empire. They owe their wealth to the people.

You) The inventor is only one person, his rights are not violated by stealing his creation and giving it to society. Its a dubious claim anyway, anyone could have come up with the idea. They owe their creation to the people.

Wow, what a poorly constructed strawman. Try again please.

I’ve never claimed anything like that, moreover that was somewhat of a tangent I was going on. The fact is that your system revolves around enforcing monopoly grants on ideas. How silly when ideas are not scarce. You’re in fact the socialist here, you’re the one favouring coercion.

@JParker

Very well. You don’t own your house. Its merely a collection of atoms set together a certain way. A house just like it may have existed somewhere within the multiverse. The timber exists seperate from the house as a whole. See, I equate products of my mind to be tangible, and thus equal to the timber. My mind is just as scarce a resource as the timber and nails. You may not agree, but you will never change my mind. If the entire argument comes down to this point, which I believe it does, we should simply all move on because the 5% of our views that differ are meaningless when we still have to fight the battle against the world as it exists today

So what? Perhaps a house has existed identical to it. I have a legitimate claim to the house because nobody can use the house without my use being restricted. And as I have the claim to the house through homesteading and voluntary exchange I can rightfully consider myself the owner. The fact that another house may have existed isn’t relevant.

As for your mind being scarce, yet is, you’re quite correct. As is the mind of everybody else, and as they can claim to have homesteaded it you have no right to coerce them not to use it through your IP laws. Ideas on the other hand are not scarce, my thinking does not stop you from doing the same thing.

[Klor]

I am all whiskey-ed up (yeah, I live in the U.S., and yes it’s not even noon yet in my time zone… I wake up early), but I’ll try to give another example regarding popular software that is heavily pirated, and I apologize in advance for the typos that are going to occur. The software in question is Adobe Photoshop–something that I’m sure many of you have used before and many of you have pirated before–or, at the very least, known many people who have pirated this piece of software. How does Adobe PS get away with charging several hundred dollars for a piece of software that your average joe could not pay for in cash (since your average joe, such as myself, is trying to save his savings for things that are job-threatening [major car problems], life-threatening problems or future investments that would be offer more profit).

Currently, Adobe PS does not really care if their software is pirated heavily. That is because they have created a product that is top-of-the-line for its industry, and they know that every major corporation would happily pay for a copy rather than face a lawsuit, unlike the ballsy independent consumer like myself and many others who think several hundred dollars is an outrageous price. Without any incentive to purchase a hard copy of the product, and with incredibly low risk of being caught, why would the average joe purchase a hard copy? There is no incentive whatsoever.

In a free market, this game would change completely, because even corporations could pirate this top-of-the-line piece of software without receiving any punishment whatsoever. In this case, Adobe would have to be more creative in its marketing of PS. Therefore, they would resort to incentive. Anybody who has used photoshop for its design and illustrative capabilities (which is what most corporations acquire it for) are aware of the incredible usefulness of custom brushes. If Adobe were to offer new sets of custom brushes on a weekly basis, and should they be of high quality, this would be worth the purchase since diverse custom brush creation can be tedious to many people who have PS, yet can be easy to the masters of PS who are out there, who are surely employed by PS. Furthermore, templates of various sorts could be released by Adobe for design purposes, along with new functions and abilities and other various updates. This, in and of itself, would make it worth most corporations to purchase the product legitimately, assuming Adobe had a method to prevent pirates from obtaining this convenient and useful updates. Likewise, if Adobe PS only cost $100-200 dollars, I would consider purchasing it myself if these updates were regular enough, along with many others who currently pirate the program. The payroll to fund these would be minimal when one considers the number of people who would purchase a hard copy of this product for the incentives offered.

This is just what I cant think of off the bat, coming from a life spent in a socialistic marketplace. A generation or two in a free market would surely allow companies to come up with far more creative methods to secure ownership of the actual product, as opposed to piracy,

[PeterWellington]

@Spideynw

I find the OP laughable.

IP is not property. They are government granted monopolies.

I find your reading comprehension laughable. Please copy and paste where I said IP was property. I’ve said just the opposite.

[PeterWellington]

@liberty student

Btw, I am all for licensing. I have no issue with that. I have no issue with enforcing licenses. But if your product isn’t very good, or your pricing is out of whack, or the market won’t bear the inconvenience (however much that is), or someone else can make your product better by refinement or adding value, all of the contracts in the world won’t keep you in business.

Well I completely agree. The only thing I’d ask you to think about is that when I’m talking about contracts I’m not just talking about software seller to software buyer. I’m also talking about third party contracts. As an example, let’s say that a bunch of software companies got together and paid ISPs for the right to police warez sites. Not forcibly take them down, just block the ISP user from accessing it. The terms of this agreement would be fully disclosed to the ISP user when he signed on for the service. There would be no force on the part of any party, only voluntary contracts. Without getting into whether or not you think this would work (I’m not even saying it would), do you think the terms of those contracts should be enforceable in court? If yes, then I don’t think our disagreement is anything the market couldn’t sort out. If not, I would like to hear more about how you define a valid contract.

@liberty student

Peter, at the end of the day one can cripple their product, absolutely. I just don’t think it is good business.

In my experience, delivering the most value at the lowest price is typically how success occurs. You can charge more for more value (although there will be a smaller market for it), but you will not survive providing the same value at a higher price. At least, you will not thrive.

Your $100/$5 model, presumes value is equal. In that case, your production and creative costs are too high. Maybe you should have hired someone more skilled to handle production, and maybe taking your creative to market wasn’t cost effective. Certainly I think you will agree, that while it took you “X” hours and $X dollars, that doesn’t mean someone else couldn’t have done it for less.

Just an observation, I find everyone is protectionist of their own ideas, job, wages, prices. However, when they are the consumer, it’s the other way around. We’re always operating in self-interest, but I think it is wise to acknowledge that we (mankind) can be quite hypocritical.

My $100/$5 model doesn’t presume value is equal. In fact, I’d say the original creator would probably provide more. But the question is, does that added value make up for the $95 price difference? And if you don’t protect your product at all, then I can leach off you in other ways too. I can simply refer the people who purchased the digital product from me to you, for things like documentation, updates, support etc. If you’re completely unprotected, how will you distinguish between someone who paid you vs. someone who paid me? If you choose to just ignore it, then do you honestly believe you’d be able to overcome that $95 gap in selling price along with the added cost of you servicing my customers? If you develop any means of restricting content or trying to distinguish who paid who, then you’re engaging in protective behavior, the exact behavior I’m arguing we’d most likely see in the free market. We can debate the extent to which companies might try to protect their investments and how effective they might be, but I honestly can’t see companies giving away their investments as a rule.

[PeterWellington]

@Klor

This, in and of itself, would make it worth most corporations to purchase the product legitimately, assuming Adobe had a method to prevent pirates from obtaining this convenient and useful updates.

This is exactly my point. Not in every case, but in many cases, companies will need to protect their investments to stay in business. This does not need to be done violently through IP or patent laws.

[JParker]

Very well, I’ll concede this entire argument. I cannot debate when the entire foundation of my opinion is rejected as fallicious, so I wont. I have been given much to think about through the comments, and for that I am grateful.

But please, also walk away with something to think about. Because I genuinely do not see why, with endless alternatives for governments, people with ideas of value to society would chose to live in such a place as you seem to advocate. I know I would never create something there, and those that would I believe would quickly lose heart as they lost time and money. Hiding behind ‘the market will come up with something’ doesnt work, I really want to hear how there is any incentive to invent when you wont have the ability to profit from it.

Again though, I think that we’re fighting the wrong fight. This difference can be settled once a society even closely resembling a free market exists. We have a long path to get to that point, and infighting will only slow the process.

I apologize if I’ve offended anybody, I’m trying only to learn and share ideas.

[Klor]

@PeterWellington

This is exactly my point. Not in every case, but in many cases, companies will need to protect their investments to stay in business. This does not need to be done violently through IP or patent laws.

Then we seem to agree. I do not think it will be hard for the free market to come up with methods to market an individual’s IP (or in the aforementioned case, a corporation’s IP) to customer’s without resorting to IP laws. IP laws (copyrights, patents) are just something people resort to so that they may sue another for millions of dollars. Since millions of dollars are at stake, companies do not pirate. If millions of dollars were not at stake (such as in a free market), companies providing IP would come up with other means to solve the problem with the absence of the state.

[Klor]

@JParker

I apologize if I’ve offended anybody, I’m trying only to learn and share ideas.

I highly doubt you’ve offended anybody. No matter who won or lost the debate, everybody at least gained a little bit. Everybody is here to learn and share ideas along with you, and if it were not for the sake of argument, we would all still be ignorant.

[Maxliberty]

@liberty student

My definition of property is that it is scarce (can only be owned by one person at a time) and the product of mixing labour with nature. Very simple.

So my definition is equally simple, its scarce, (it can be owned by more than one person at a time) and is the product of mixing labour with nature.

How we can recognize property is it has value. Information/knowledge has value. There are ready markets for this property. Markets place a value/price on it all the time.

IP meets all the defintions of property. IP has one unique characteristic which is that one owner’s use of it does not interfere with another’s. Also, I consider labour not just what I do with my hands but the work performed in my mind as well. To the extent the market puts a price on this then I can profit from my labour. So how do you profit from things you create that once shared can belong to the other person? The answer is contracts. You can agree to limit your actions in exchange for informaton that you do not have and the other person is going to provide.

Simple examples are non compete and non disclosure agreements which are in fact market tools to deal with these problems.