Application of Nonproprietary Information Production to the World of Startups

-- By JamieSavren - 18 Oct 2021

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.

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.

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).

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).

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).

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.

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.

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.

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.

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.

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.