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< | Application of Nonproprietary Information Production to the World of Startups | >
> | Application of Nonproprietary Production to Startup Companies | | | | |
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< | -- By JamieSavren - 18 Oct 2021 | >
> | -- By JamieSavren - 17 Oct 2021 (revised 5 Jan 2022) | | | | |
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> | This paper will apply the thesis presented in the book “The Wealth of Networks: How Social Production Transforms Markets and Freedom”, by Yochai Benkler to the operation of a startup company. Benkler expresses his view that the emphasis our models of innovation place on proprietary strategies hinders global human development, and that a shift must take place to give a substantial role to nonproprietary production. | | | | |
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< | This paper will briefly examine the thesis presented in the book “The Wealth of Networks: How Social Production Transforms Markets and Freedom”, by Yochai Benkler (2006). I will then apply this theory to the operations of a startup company – a world that I have experienced first-hand. In the interest of keeping things brief enough for a short paper, my critique will address Chapter 12 of Benkler’s book in particular. | >
> | Startups are built on the assumption that what they do is innovative, unique, exciting and profitable. Their valuable intellectual property – their algorithms and software – is their crown jewel. Therefore, these companies usually patent their core software products and keep them secret so that they cannot be copied, modified or redistributed by others. | | | | |
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< | In his book, Benkler expresses his view that the emphasis our models of innovation place on proprietary strategies hinders global human development, and that a shift must take place to give a substantial role to nonproprietary production. | >
> | Implementing Benkler’s theory in the world of startups would warrant a drastic restructuring. Although not entirely a solution as progressive as Benkler’s theory, there have been some baby steps in that direction. Enter “building in public”, or BIP for short refers to when a startup builds a product or service in public, they allow people to see their building process from the start. | | | | |
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< | He makes four economic observations. First, he opines that the baseline conception that proprietary strategies are dominant in our information production system is overstated: the education system is infused with non-proprietary motivations; arts and sciences are replete with social-psychological motivations; political and theological discourses are based in nonmarket forms; and even industrial research and development is mostly based on improved efficiencies and customer relations (460-61). Second, he opines that the expansion of exclusive rights is akin to a tax on nonproprietary models of production, making access to information more expensive, while improving appropriability for some, adversely affecting operating conditions of nonproprietary producers (461). | >
> | Why would a startup BIP? Firstly, it creates greater transparency, by definition. This transparency helps build trust in the brand among potential investors and customers. It shows that the company isn’t just a house of cards and makes it seem more authentic. The transparency has other effects, for example, with regard to privacy concerns. A BIP startup would reveal exactly what personal information is being used and how. | | | | |
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< | Third, Benkler argues that the basic technologies of information processing, storage, and communication have made nonproprietary models more attractive and effective. Low-cost processors, storage, and connectivity made it feasible for individuals to create and exchange information in patterns of social reciprocity, rather than proprietary production (462). Fourth, Benkler describes and analyzes the rise of peer production, which presents a challenge to conventional thinking about the economics of information production (462-63). He suggests that as the first stage of the information economy emerged, production followed an industrial model, because information production and exchange required high costs. The current networked stage of emerged when the barrier of high costs was removed (463). | >
> | Secondly, BIP allows the company to receive valuable feedback, tips and advice from the public, in order to improve their product. Maybe the company’s programmer is having trouble fixing a bug. If an outsider has dealt with something similar in the past and was able to figure out how to solve it, it could spare the programmer a lot of hard work and frustration. Furthermore, getting feedback on a product, especially before it has even launched, is invaluable. It’s the most authentic market survey that could be performed. The company can then use this valuable information in order to tweak the product and better tailor it to the target customer group. | | | | |
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< | Benkler argues that a shift to information production in which a substantial role is given to nonproprietary production goes to the “core of our basic liberal commitments” (464). The emergence of nonproprietary production offers strategies to improve human development, as productivity in the information economy can be sustained without the exclusivity that made it difficult for knowledge to diffuse beyond the elite (464). From an individual autonomy perspective, this shift offers improvements in how we perceive the world, how we can affect our perceptions and the range of actions open to us (464). From a democratic perspective, it offers a reorganization of the public sphere, allowing individuals engaged in public discourse to be their own source of deciding whom to trust (465). | >
> | Thirdly, BIP enables a practice called “forking”. For example, Company A’s programmers wrote code for a program that takes pictures of trees and colors them blue. A programmer, who is unassociated with Company A, but has access to its code, can then “fork” the code by copying it and building onto it so that she can create a program that colors trees red, white and blue and plays the Star-Spangled Banner. | | | | |
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< | The effects of Benkler’s theory on intellectual property law are immense and obvious. In order to demonstrate I will apply this theory to the world of startups, a world with which I am relatively familiar. | >
> | However, Benkler takes us one step further. Under his theory, startup companies would not patent their inventions and software would be free. Doing so would mean that anyone could copy, modify and redistribute software without payment or restriction. These companies would have to be prepared to compete against giants such as Google, Amazon and Apple, without the classic intellectual property protections that are currently viewed as essential for the protection of any invention. A good example of this rationale is Wikipedia – it’s free and anyone can contribute and edit articles. This revolution, on the face of it, goes against startups’ entire raison d’être, according to capitalism. This revolution would affect every aspect of the life of a startup company. In my view, this necessarily means that the underlying assumption is that money is not the only motivating factor in this ecosystem. | | | | |
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< | Startups are built on the assumption that what they do is innovative, unique, exciting and profitable. Their valuable intellectual property – their algorithms and programs – is their crown jewel. A great idea is a good start, but it isn’t enough, you have to be able to make it happen. As a result, some startups even being operating in “stealth mode”, where they do not disclose anything about the company to the general public – only to investors. | >
> | In our capitalist society, investors of various kinds, whether fund or private, invest in startups hoping that their safe-guarded and protected intellectual property is unique and valuable enough to be monetized and lead to an increase in the value of the company. Under Benkler’s regime, investments in startups would look completely different. Investors would not be investing in a company to gain a large return on their investment. Instead, investing in this startup could bring good publicity. It might also signal that they are interested in social change or support innovation regardless of whether they capitalize on it directly. | | | | |
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< | Implementing Benkler’s theory in the world of startups would warrant a drastic restructuring of their business models, very few of which traditionally would use open sources, as, on the face of it, they go against their entire raison d’être. However, a new movement is trying to change this. Enter “building in public”, or BIP for short refers to when a startup builds a product or service in public, they allow people to see their building process from the start. | >
> | Under the current regime, a startup company hires employees, paid to develop its product. Since there is a relatively small number of employees, even the best have limited time and resources to spend on the software. Under Benkler’s regime, the same product could be open-sourced, such that the aggregate knowledge of many people that would edit, redistribute and copy it (for free!), would lead to a better product, accessible to more people. The software might even utilize their aggregate computing power. | | | | |
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< | Why would a startup BIP? First of all, it creates greater transparency, by definition. This transparency helps build trust in the brand among potential investors and customers. It shows that the company isn’t just a house of cards and makes it seem more authentic. The transparency has other ripple effects as well. For example, with regard to privacy concerns. A BIP startup would reveal exactly what personal information is being used and how. | >
> | In terms of financing a company’s operations, if its revenue does not come from the ability to monetize on the scarceness of the service it offers, revenue could come from advertising. However, there is a better option, under which the company could have little to no operation costs. For example, it costs a lot of money to hire employees to create the product. What if the startup split its initial tasks up into thousands of little pieces, asking people on the internet to perform them for free? The initial plan could be designed at little cost, while the people who participate would feel good knowing that they contributed to a cool project, for free, because it’s fun or interesting. It might give them a sense of purpose or meaning, or a new social circle. This phenomena is the exception in today’s capitalist society, but the rule in Benkler’s. | | | | |
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< | Secondly, BIP allows the company to receive valuable feedback, tips and advice from the public, in order to improve their product. Maybe, for example, the company’s programmer is having trouble fixing a bug in the code. If an outside has dealt with something similar in the past and was able to figure out how to solve it, it could spare the programmer a lot of hard work and frustration. Furthermore, getting feedback on a product, especially before it has even launched, is invaluable. It’s the most authentic market survey that could be performed. The company can then use this valuable information in order to tweak the product and better tailor it to the target customer group. | >
> | Furthermore, contributors to the product do not need to ask permission to make changes, which eliminates those transaction costs, since this is not a property-based regime. Companies would be able to spend the money that they usually do on IP protection on advancing and improving their technology and products in other ways. | | | | |
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< | Thirdly, BIP enables a practice called “forking”, whereby a programmer has access to code that she can build onto. For example, Company A’s programmers wrote code for a program that takes pictures of trees and colors them blue. A programmer, who is unassociated with Company A, but has access to its code, can then “fork” the code by copying it and building onto it so that she can create a program that colors trees red, white and blue and plays the Star-Spangled Banner. If Zoom’s code were open, we could have taken it and tweaked it so that we could have our very own video conferencing program where our privacy and data are safeguarded, without having to write a program by ourselves.
There are many more reasons to implement BIP, thereby applying Benkler’s theory to the real world. Although Benkler’s theory is heavily grounded in considerations pertaining to equity and social order, it is clear that its application can be good for business as well.
I think the draft could be improved by differentiating "building in public," which is the opposite of stealth mode, from using free software and non-patenting IP strategies. Your summary of Yochai's argument is accurate down to its subtleties, but it takes up too much space. Your responses to what he says are, however, orthogonal to the real point of his argument.
Your discussion of "building in public" conflates what free software production is like to what collecting feedback from customers or "having access" to competitors' code is like. Hence your idea that "if Zoom ... was open, we could have our very own video conferencing program where our privacy and data are safeguarded, without having to write a program by ourselves." But the free software world had video-conferencing programs of our own long before Zoom existed. We do run services on our own servers that protect our privacy; if you and I were to hold a video-conference it wouldn't be on Zoom, it would be on meet.moglen.us, my Jitsi Meet server which is a VM running on bare metal in my office, but which will run in FreedomBox on a Raspberry Pi in our next FreedomBox release. If you were attending one of the Indian Institutes of Technology all your courses would be hosted when remote on BigBlueButton the free software world's videocon system designed to be optimal for higher education, which is way better than Zoom at doing what Zoom was never intended or designed to do.
Yochai is talking about a different way of doing humanity's inventing. To apply his ideas to startup architecture is to deal with a free software startup that doesn't patent its inventions, whose core product is software everyone can copy, modify and redistribute without payment or restriction (and which therefore from an economic point of view has to be prepared to compete against all or any of its users—including potentially AWS, Apple and Google—without the "intellectual property" protection said by almost all of capitalism to be necessary to inventing anything).
For such a startup, everything will be both familiar to all other startups, and completely diffrerent. From investment to development, operations, finance and future, every detail is affected. My law practice at SFLC and Moglen & Associates advises such entities, non-=profit and for-profit. There are many useful things you can write about this area, from your experienced perspective. If you assume that we both know what Yochai has said, freeing up much more space to observe the details in practice rather than to exposit his theory, you can build a much improved next draft. | >
> | What’s exciting about this regime is that startups might even not be able to anticipate the developments that other people make to the initial software, and the final product might be better than they expected. Benkler’s vision would lead to a different way of doing humanity’s inventing. | | |
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