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Tag funding innovation content startups economics

Towards a new model for funding innovation and content for the public good

08 February, 21:08, by Gregory Magarshak Tags:

There is a great talk by the RSA about what drives us: … until recently, it was not clear from an economics point of view why there would be so much innovation and work done entirely for free. But smart people are driven by purpose and making a difference in the world, and as soon as they have enough money to take care of their needs (rent, food, etc.) with a large safety net (2x-3x) they will focus on contributing to make a difference, and will create a lot of value without needing any more money “right now”. I think this might be very important in the area of funding entrepreneurs.

I realize it’s controversial, but I did want to throw it out there that ever since digital copying has become essentially free, our ideas about copyright need to be re-examined. To illustrate why, I wrote a post on hacker news showing how one can make a legal pyramid scheme by relying on copyright:

Copyright and patent protection are essentially monopolies enforced by the government — no one except the inventor or copyright holder may take an action without first clearing it with them. Currently, that is the way it is, but the systems were created in times long ago, when making a copy of a book was much more expensive. Today, when making a copy of an e-book or song in digital format is “essentially” free, I think it’s important for us as a society to revisit the issue of intellectual property and see how much of it was done to protect the distributors (publishers, customer support, the cost of actually making copies etc.) and how much of it was to incentivize innovation.

I wonder, too, if the patent system for software is a smart idea, considering the pace at which software evolves — every time I ever read about a patent suit in the news, it seems really harmful to the actual innovation in the industry, and I have to wonder how many landmines a typical startup is actually infringing on, if every patent holder followed a policy of diligently suing all infringing startups out of existence. It’s well known that a lot of innovation comes from startups, and intellectual monopolies that last 17 years in a fast-moving field like software hurt startups more than large corporations that have money to throw around. It is in the interest of large corporations to use whatever means they have at their disposal to eliminate their competition or buy it — including large patent portfolios.

Sure, copyright and patents may have its problems, but without it, how can we have the creation of new content?

Movies, songs, drugs, software, and startups… some of them go on to benefit lots of people. But it takes $ to make them.

There’s the research and development phase,
There’s the distribution system

The question is, how can we as a society have the benefit of good products without enforcing some sort of monopoly (copyright or patent based) which causes ever invasive methods of policing things like copying bits?

Well, if everyone was free to copy the bits, where would the money come from to create new movies, books, drugs, etc?

One possibility is subscription services. All those “race for the cure” and other fundraisers, or St. Jude’s hospital, etc. ask you to give $ to support research to cure some disease. If we learned one thing from open source and scientific journals, it’s that work done in the open produces better and more accessible results in the long run, for the entire public. So if we raise money for cancer research, say, investing that money in proprietary labs might be seen as irresponsible. That money should be put into “open source” type efforts to create drugs for the public good.

If we apply this model (of open source foundations) to movies and songs, though, we’d completely change the culture. Look at Wikipedia. It is collaboratively edited and arguably a great resource. And yet, there are no rockstars on wikipedia, there are nothing like a great american novel or a famous author. It’s good content produced collectively.

For utilitarian things like drugs, and maybe even technology startups, the “open source foundation” is an interesting model, and certainly one that Google and Apple have benefited from (e.g. WebKit now powers Safari and Chrome, which made Android and iOS possible). We as a society have benefited from open source — mobile browsers are just one example.

But for art, our society wants to have heroes, it wants to have great movies. If there were 20 different versions of The Matrix, some that made more sense than others, it would be a completely different society. We’d need curation during the actual development process, to overcome the glut of content. We’d need “releases” to be ordained and distributed on distribution networks, while less popular forks fall by the wayside. We’d have more of a Linux-type world than a MacOS type world.

In a way, American Idol, America’s Next Great Restaurant, etc. are a similar model. The show pulls in ratings and can support itself with advertising. The curation during the show (done by the public, no less!) all but guarantees that the winners will be popular. The winners are then spun into a brand.

So I think the future of innovation and content creation in this world will have some of these elements: open source foundations, public curation during development, and the revenue will come from subscriptions to distribution networks, which will non-exclusively deliver the curated “releases” and will compete on ease of use. Content will be easily searchable, and accessible. Sure, private copying will take place. But the CULTURE of paying a subscription for easy access to new releases, the culture of curating the best brands (singers, movies, etc.) through competitions will keep the economy going.

The main question is, will that culture encourage good things to be produced for the public, and will it enable entry for new and fresh talent to step up and be identified? My hunch is, very much YES.