Make something and sell it

I’ve run across a couple podcasts this week promoting the radical idea that you should sell what you make.

The latest Entrepreneurial Thought Leaders podcast features David Heineimeier Hansson’s talk Unlearn Your MBA which he gave to a room full of MBA students.

The latest Tech Nation podcast from IT Conversations is an interview with Jaron Lanier. Lanier is a virtual reality pioneer and the author of You Are Not A Gadget.

Both Hansson and Lanier have contributed to the “free” culture but both are also critical of it. Hansson says he has benefited greatly from open source software and make his Ruby on Rails framework open source as a way to contribute back to the open source community. But he is also scathingly critical of businesses that think they can make money by giving everything away.

Lanier was an early critic of intellectual property rights but has reversed his original position. He says he’s an empiricist and that data have convinced him he was dead wrong. He now says that the idea of giving away intellectual property as advertising bait is unsustainable and will have dire consequences.

Giving away content to make money indirectly works for some businesses. But it’s alarming that so many people believe that is the only rational or moral way to make money if you create intellectual property. Many people are saying things such as the following.

  • Musicians should give away their music and make money off concerts and T-shirts.
  • Authors should give away their books and make money on the lecture circuit.
  • Programmers should give away their software and make money from consulting.

There’s an anti-intellectual thread running through these arguments. It’s a materialistic way of thinking, valuing only tangible artifacts and not ideas. It’s OK for a potter to sell pots, but a musician should not sell music. It’s OK for teachers to make money by the hour for teaching, but they should not make money from writing books. It’s OK for programmers to sell their time as consultants, and maybe even to sell their time as a programmers, but they should not sell the products of their labor. It’s OK to sell physical objects or to sell time, but not to sell intellectual property.

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27 thoughts on “Make something and sell it

  1. I listened to the first half of the DHH podcast on the way to work this morning. And I really enjoyed it. I like that he is so straight forward and blunt. I tend to talk/think that way and I get frustrated talking with sales reps and other from firms where the norm is double talk and ambiguous statements.

    w/r/t “free” I suspect this is a bit of a fad right now. Not that it will completely go away, but we will figure out what economic roll free plays and it will continue to play that roll. Just like the “blah blah blah as a service” marketing model will be less trendy at some point, but still used widely. I think it’s important to not get too religious about marketing/economic pricing models and to really think about which model belongs where, and why.

    So, yes, I totally agree with your sentiment that there’s a need for multiple pricing models. No one model is uniquely moral or “right.”

  2. It’s completly diffrent to say that people can sell their ideias and say that they deserve a monopoly on these ideias.
    I am ok with the fact that you want to sell a software you’ve made, but why do you think you (of anyone) are special and deserve a monopoly on the use and reproduction of the software? No potter reclaim a monopoly on the pots they sell and that’s right.
    It would be better to separate the right to sell and the right to a monopoly. Monopoly is always a bad thing and we should fight it.

  3. It helps to be specific about what “monopoly” applies to. A potter has a “monopoly” on the pots he creates, but he does not have a monopoly on pottery. His pots are his private property, and only he has a right to sell them. But others are allowed to create their own pots.

    J. K. Rowling owns Harry Potter because she created him. She owns her books and the fictional characters she created. But she does not have a monopoly on writing fantasy novels. If a government gave anyone exclusive right to create one genre of literature, that would be a true monopoly and a bad thing.

    A software vendor has exclusive rights to the applications they write, but they don’t have a monopoly unless no one is allowed to make competing products. Microsoft owns Windows, but they don’t have a monopoly on operating systems.

  4. I don’t think many people from the “free” culture consider trying to make a living from the fruit of ones efforts immoral. What they do consider to be immoral is the imposition of artificial scarcity, e.g. my enjoyment of a piece of music in no detracts from your ability to enjoy the same piece of music.

    Music I think will always be around no matter what – if nothing else its a surefire way of getting laid – but I’ve always found the argument that consulting/support would provide an alternative income source for programmers very weak.

    I work as a programmer for a manufacturer of industrial machinery and as our platform is not open whatsoever, i.e. we’re the only ones who can write software for it, we’re in no danger as of yet from these trends.

    For people who want to make a living from software, this I think is going to be the reality. There is enough open source stuff out there of very good quality that the only viable way of making a living from the craft will be to work in specialist niches

  5. “Free” software is not about giving things away, it’s about having access to the source code. Access to the source code has many more benefits than just being cheaper, such as security and flexibility. Open source can be monetized by selling support for it. Take Red Hat for example, they make hundreds of millions by doing that. Granted, Red Hat is the exception and not the rule, but it shows it can be done.

  6. Nice post. I don’t want to get too off topic. I think we need to take a hard look at how software and business method patents are awarded and continually resubmitted with small changes, resulting in perpetual exclusivity. The whole idea is to allow inventors to reap benefits without preventing the spread of new ideas and methods.

    @Manoel Galdino: No, all monopolies are not bad. Abusive monopolies are bad.

  7. The “music should be free” thing seems to be a surrender to the idea that musicians should accept that their IP will be copied willy-nilly and that they should suck it up and hit the road, a live performance being a more appropriate analog to the potter’s pot – you can only ever buy a copy of a music recording after all.

    It seems to demand that they therefore better be at least a halfway-decent live act, which may spell curtains for some otherwise competent acts.
    Under that model record companies have to evolve into tour sponsor/promotor/managers in order to stay alive. Not that they will – they have too much invested in the status quo (a band, quite frankly long past their best) to be able to make the shift, so we’ll mayhap get some kind of music promotion VC thing rising from the ashes.

    I remain hugely sceptical that much of the zero-cost consumption is really displacing much purchasing. There are ways to consume music (effectively) freely and legally that weren’t available to people a decade ago. Pandora, LastFM, Spotify, YouTube, MySpace are the first five I thought of: all of those, I submit, are displacing music-buying to some extent. Beyond that, the “majors” are further inconvenienced by the reshaping of the demand curve: buyers have access to the long tail through resources like eMusic, CDBaby, Amie St, Sellaband, which also soak up major bucks.

  8. Gene, I think patents have more potential for harm than copyrights. A patent can stifle an entire industry whereas a copyright protects a single work. I’m not against patents, but there have been some absurd patents granted.

    By the way, here’s something I wrote on patents.

  9. Perhaps you know this already, but you are opening a philosophical can of worms that has been discussed for centuries.

    Augustine and Jefferson would argue that physical property is natural, since a physical object can only exist in one place at a time.

    Intellectual “property”, on the other hand, is purely a legal construct; you have no natural right to your ideas beyond the right to keep them to yourself. Intellectual “property” was invented specifically “To promote the Progess of Science and useful Arts”. Copyright and patent laws should always be judged based on how well they achieve that end.

  10. I think the real issue here is that physical objects have built-in copy protection. It takes a lot of time, effort, and materials to make a copy of a clay pot, whereas most of us have the tools readily available to copy and distribute music files.

    The idea that “Musicians should give away their music and make money off concerts and T-shirts,” is fine as long as it’s presented as an alternative to selling lots of copies of a record. What I think is morally wrong is trying to force artists into this business model as their only alternative because too many of us think we’re entitled to free music. We’re not, unless the owner (and I don’t mean the person who bought a copy) chooses to give it away.

  11. Ideas are not discovered by people, but by groups of people. Increasingly large groups, with increasingly porous boundaries. Companies who rely on a closed in-house model are losing ground because open models produce better intellectual property at lower cost. When you have a large number of contributors on a project, who has the right to make money off of it? How do you redistribute the money across contributors? And what do you do if the redistribution process is so expensive that it eats away most of the profit? Valuing partial authorship of ideas is a lost cause, but does it mean we should revert to less efficient (closed, small-scale) models? I hope not.

  12. @Gene, I would apreciate if you could point to me an example where a monopoly was not abusive.

    Regarding the monopoly of the potter, I would like to clarify my arguments.
    It seems to me that the potter has the private property of the pot he created, but in no way the monopoly of pots. He would have the monopoly of pots if him only could sell and/or reproduce the pot. But, in fact, I can buy the pot and do another one and start competition at this market.
    So, I am totally ok with the right to first sell. If you create a software why should you be obliged to give it for free? It’s non sense. However, my point is: once you put it in the market and sell it, why a buyer should be forbidden making use of it in the way it suits to him?
    nowadays, I cannot extract part of Windows and use it at another PC ou to make modifications on it and sell it. However, I am in no way forbidden to cut a t-shirt, mix with other clothers of mine, and sell it in the market as a new product.
    I understand we live in a world of copyright and patents, and it seems to us that innovative people deserve the monopolies they receive. But I think that in general we would be better without them.

  13. Hi
    I’m an Ubuntu user, I had contributed with code and work to the open source community. There are very good programs in OSS and not so good too, it takes a lot of work to do quality software.

    I agree with your post, but with limits: Consider a real machine patent and you have the right over it for 20 years. With copyright you have 70+years once the author is dead!! This is only that way because the US congress decided USA could loss a lot of “properties” if films and songs made 20 years ago go to the public domain and extended it over and over again.

    I buy music and support the creators, people love to support the people they admire, but not with Beatles and people my parents already bought their music long long ago. I’m not going to pay again for a emulator ROM of a game I bought for my SEGA GENESIS.

    In the next two years, any book is going to be digitalized and put on P2P networks, so people now have the power, and they are going to use it:

    COMPANIES: It cost 30 dollars because distribution cost a lot, the marketing…
    PEOPLE:I don’t want to pay distribution, either marketing, just sell me the ebook.
    COMPANIES:We don’t sell ebooks, they are so cheap.
    PEOPLE:Ok, I will download it myself.

  14. @Jose, I agree that it sounds odd at first that copyright should last so long. But I changed my mind on this when I read Digital Barbarism by Mark Helprin. Here’s his argument in a nutshell.

    Suppose he were a businessman instead of an author. If he built a business all his life, he could leave that business to his children. And if it were properly managed, his grandchildren and even great grandchildren could benefit from what he made. But Helprin is an author. The wealth he has created over the course of his life is a set of copyrights. Shouldn’t he be able to leave something to his children as an inheritance?

  15. Christopher Rasch

    Ferrari invests millions in the design and engineering of the their cars. Due to the high demand and inherently limited supply of Ferrari’s, they can sell them for $150+ thousand dollars.

    However, imagine that someone invents a duplicator gun (dupegun), which can duplicate (dupe) any physical object for $0.05, without causing any harm to the original.

    Now anyone who wants a Ferrari can just dupe one they see on the street. Wouldn’t this newfound duping technology be a great boon for society? Now, anyone who wants a Ferrari can have one for the cost of a nickel and a dupegun.

    Of course, Ferrari might not be too happy about this. Now that anyone can dupe their cars for almost zero cost, they can’t charge $150K+ for them.

    Do you think the appropriate government response to Ferrari’s unhappiness should be to give them a monopoly on the duping of Ferrari’s? To try to prevent every dupegun owner on the planet from using their dupeguns without permission and payment to Ferrari?

  16. @Christopher: What if you pointed your dupegun at paintings or at currency? That’s called forgery, governments have passed laws restricting this.

    Picasso had a monopoly on painting Picassos and the US government has a monopoly on making US currency. Why shouldn’t Ferrari have a monopoly on making Ferarris? In fact, they already do. You can duplicate a Ferrari now. But it takes a lot of work and it’s illegal.

  17. @John —

    You can duplicate a Ferrari now. But it takes a lot of work and it’s illegal.

    But that is entirely the point. If the cost of duplicating a Ferrari falls, the law should be changed.

    There are two kinds of laws: Those that protect the “natural” rights of the individual, and those that protect society’s interests.

    Murder, for example, is in the first category. It is illegal because we each have an “unalienable right to life”; even if a majority of people would benefit from your demise, they cannot kill you.

    Speed limits are in the second category. How fast you can drive is determined solely by society’s chosen trade-off between safety and efficiency. It is unrelated to any natural right you have as an individual.

    Intellectual “property” laws are in the latter category. The natural right you have to an idea in your head is to share it. As a society, we choose to give up that natural right and secure for a creator of ideas, for a limited time, exclusive rights to his or her creation. We, as a society, agree to give up our natural right to share information in order to promote the creation and dissemination of new ideas.

    Back when printing presses (or phonograph factories) were expensive, most people did not own one, and so they were not giving up very much. That made even extreme protections for ideas appropriate. But as the cost of sharing and duplicating information has fallen, the cost to society of not being able to share has risen. (People obviously derive a LOT of value from sharing data, judging by how much they do so even when it is illegal…) Therefore, the protections offered by intellectual property laws ought to fall to reflect the new balance of the trade-off.

    Again, the only natural right you have to an idea in your head is to keep it there. Copyright and patent laws exist solely to serve society’s interests, not yours. The sole legitimate evaluation criterion for any intellectual property law is how well it trades off society’s benefit from sharing versus society’s benefit from having new ideas. Technology is clearly shifting that trade-off in the direction of weaker protections.

  18. P.S. Forgery and counterfeiting are completely different topics, by the way. They have nothing to do with intellectual property; they have to do with fraud, just like false advertising.

    It is perfectly legal to duplicate one of Picasso’s paintings. What you cannot do is to sell it based on the claim that it is an original. That is not because Picasso (or his estate) has a right to his work; it is because the buyer has a right not to be defrauded.

  19. @John
    You mention the argument “Shouldn’t [creators of IP] be able to leave something to his children as an inheritance?” — Well, the gift economy article in Wikipedia has this bit of text:

    “small-scale gift economies exist in most families, with gifts of time, money, nourishment, shelter, and expertise being given without any overt negotiation of reciprocal behavior.”

    As I see it, the “deal” is we support our children while they grow up, with the implicit commitment that they’ll later support their own children (the same happens the other way, too, with adults supporting their aging parents). This cycle is older than money, and societies, and tribes, and the human species itself: It’s written deep into our instincts, at least (I’m playing safe here) since when our ancestors became mammals in the chain of evolution.

    So, IMHO, inheritance is a nice thing but shouldn’t be taken for granted as a right we all have, just like we don’t have the “right” to get gifts on our birthday.

  20. I think even those on the fringe end of “freedom of information” wouldn’t argue that intellection property has no value. Of course, it does. The trick is to maximize the value gained for society and, at the same time, reward the creators in proportion to the value they produce. Patents and copyrights do the second at the expense of the first goal. We sacrifice the utility that could have been had by, say, getting free music from Napster, or building software that uses a patented feature.

    The benefit of patents and copyrights is that it applies a market mechanism to valuing the work. Judging value is something that markets are good at. But, in order to have a market, we need scarcity. And granting monopoly creates “deadweight loss”, which is especially large for non-rival goods as they could otherwise be copied freely. The benefit of market price signal comes at a cost.

    That’s one way to address the problem of rewarding IP creators. There are other ways. All ways are imperfect, probably because it’s fundamentally hard to optimize multiple things at once. Extreme and biased views on either side make this already challenging problem even more difficult.

    @Nemo I like your distinction between the kinds of laws. IP law is just a set of rules that we agree on for the purpose of conducting business in a civilized way, with the supposed goal of maximizing benefit for everyone involved.

    If you have way too much time on your hands, Steve Maurer of UC Berkeley does an excellent job of explaining the economics of IP in the first lecture of a class on Information Technology & Public Policy.

  21. Wait a minute, in one breath above you say that “[J.K. Rowling] owns her books and the fictional characters she created.” and then later say that “copyright protects a single work”. I think the first is a misunderstanding of copyright and the second is more accurate (although the whole recent JD Salinger thing muddied the waters). There is a big difference. One allows others to create derivative works and the other does not. This is a large area of contention in contemporary copyright conversation.

    On the whole, though, I think you misrepresent the business model of “free”. There may be those that think of “free” as they are entitled to any intellectual output in a manner that does not benefit the originator. Those, I believe are a very small minority (a minority that would correlate with the normal percentage of extremely self-interested individuals in society). The true business model is to attempt to recognize what people are willing to pay for and also recognize that some intellectual output can be an enticement to buy other things. Grocery stores give away samples, plumbers give free estimates (and many good plumbers give free advice), etc. What difference does it make if someone gives away their music if they are making significant amounts of money selling tickets, memorabelia, etc.?

  22. “There’s an anti-intellectual thread running through these arguments. It’s a materialistic way of thinking, valuing only tangible artifacts and not ideas. It’s OK for a potter to sell pots, but a musician should not sell music.”

    Something tells me you’ve missed the point of these arguments. You can sell anything you want to. Provided there’s a market. This is not anti-intellectual. Its economic Darwinism.

    Free market capitalists have been whining for a long time to let the market decide. The market is now deciding. There’s nothing anyone can do about it if no one wants to buy.

  23. Spanky, what I’m calling anti-intellectual is the attitude that it is immoral to charge for intellectual content. The market may indeed decide that it will pay for T-shirts and not for CDs. In that case it would be unwise to insist on selling CDs, but it would not be immoral.

  24. John …
    Morality has very little to do with “charging for” or “stealing” content. While killing someone deprives them of their life, “stealing” content in and of itself doesn’t take anything away from the content owner; they still have their content. And historically, we have had no laws about copying ideas. Nothing in the ten commandments about failing to cite sources, or copying texts without attribution.
    However, we did pass laws which define infringement, and give authors rights to their works. This isn’t a “natural” or “obvious” right, but one granted for a limited time by government for a purpose, to promote the advancement of Science and the Useful Arts.

    As our ability to copy content increases, our ability to produce content increases, and the cost of both approaches zero, the market for content alone is going to get tough. With copyright or without copyright, nobody will be able to utilize what is technically possible to be done with content under present copyright laws.

    It is one thing to talk about the 30K it would cost fill an IPod up with licensed content (as Microsoft claimed in an ad), but what about tomorrow? When 100 TB media players are twenty bucks, what can one possibly do with such a device at $1.20 a song? We going to use 99.9 of those TBs to hold databases to auto delete infringing songs?

    In other words, content providers are willing to cut their costs on distribution, on publishing, using an Internet connection I pay for to put their content on a drive that I have to buy. Additionally, am I going to have to buy hardware and pay to run it and maintain it whose principle purpose is to make sure content providers get paid?

    This isn’t going to happen. Enough content producers will provide free content to give consumers a choice. Pay and Pay and Pay for the same limited content, opt out, or go with some more affordable offerings.

    The answer will be the latter, either by someone who figures out that this is the only answer, or through what is being called ‘piracy’.

  25. ‘It helps to be specific about what “monopoly” applies to. A potter has a “monopoly” on the pots he creates, but he does not have a monopoly on pottery. His pots are his private property, and only he has a right to sell them. But others are allowed to create their own pots.’

    No, the potter ceases to have a monopoly on his work once he’s sold it. When I buy a pot from Harry Potter, he pretty much loses his rights to that pot. If I choose to sell it to another guy, Harry can’t do anything about it. If I choose to mould the pot and make copy-pots and sell those copy-pots to others, I am free to do so.

    It doesn’t always work this way, of course. The pot may be covered by a patent, which gives Potter a temporary monopoly on his product. But patents expire, so in time, anybody can still mould Potter’s pots and sell copy-pots.

  26. I think this would be an appropriate place to observe a minute of silence for the distinction which used to be carried by the difference between “should” and “ought”. That distinction would be helpful here if it were still a common part of the English language.

    When advocates of free say things like “Musicians should give away their music and make money off concerts and T-shirts.” etc., they nearly always mean “Musicians ought to give away their music…”, without the moral suggestion that not giving it away is somehow evil. All that is meant is simply that it is a good idea to give away one’s music and make one’s money off a scarcity. I don’t think I’ve ever seen anyone seriously entertain giving things away for free as a moral principle, particularly where creative work is concerned.

    So, of COURSE it’s okay for a musician to sell music or a teacher to sell books. It’s just not likely to make you much of a living these days… Please note also that it is possible to be in favour of a “free” culture in which cultural ideas are shared without the permission of the creators without denying authors the right to sell their work. Believing that ideas should be widely shared does not mean creators should not try to benefit from their creations.

    You lose me completely when you suggest that being in favour of “free” somehow means you cannot or do not value ideas. (“valuing only tangible artifacts and not ideas.”) Ideas fundamentally gain value when they are shared as widely as possible. I *do* think there is a moral imperative to spread good ideas as widely as possible because of what this means for humanity. In an online world where spreading ideas is virtually costless, restricting access to ideas in an attempt to artificially boost price is a problem, and it’s a problem because it reduces the value of the idea by slowing its spread. But that doesn’t mean the idea shouldn’t have a price or that it’s somehow impossible to charge for it. It just means you ought to be charging for something other than access to the idea. Better to charge for the creation of the idea (e.g. a customized programming project, as suggested in another comment), for example, or a physical manifestation of the idea (a printed, dead-tree book), or any other scarcity created by the idea.

    So, sorry, I consider attempting to monopolize ideas (i.e. restricting access to) far more anti-intellectual than the idea that ideas should be shared freely. How on earth can you reach the conclusion that spreading ideas is anti-intellectual?

  27. @John #14

    If he built a business all his life, he could leave that business to his children. And if it were properly managed, his grandchildren and even great grandchildren could benefit from what he made.

    I think the crucial part of handing down the business is the subsequent management of that business. The children must continue to develop and enhance that business. They can not just sit back and watch the money flow in, at least not for very long. If a generation or two ignore the business it will rot and future generations will not have the direct benefit of the business. In fact, others could come in and duplicate that business, filling the void left by the previous business. If an author creates a character or world and then a generation or two completely ignore that creation why should subsequent generations be the only ones allowed to work with it?

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