Larry Downes: “The Laws of Disruption” | Talks at Google

>>Good afternoon, everyone.
I’d like to welcome you to another outstanding [email protected] talk.
We’re very pleased to host today Larry Downes, who is an expert of the
intersection of technology and law. You may know him from his previous book which
is “Unleashing the Killer App,” which was distributed in a sort of open
source web posting-type distribution back in 1998, very revolutionary
for its day. He’s a partner at the Bell Mason Group and
he — as I said, he’s authored numerous books on the intersection
of technology and law. Larry also makes his way across the grad school
teaching circuit. So he has appointments at the Chicago GSV,
the Haas School, as well as the Northwestern School of Law.
And currently, he’s down the road at Stanford working with the Center
for Internet and Society. Today, he’ll be speaking to us on a very core
topic: The Laws of Disruption, Harnessing the Forces that Govern
the Business and Life in the Digital Age.
As the Internet continues to revamp the ways we do business in an
organized society, Larry offers us some guideposts from the past in
terms of how to deal with these changes and disruptions.
And he also will give us anecdotes who would he don’t react to them
properly. Now you may think for a person like Larry,
there’s a lot of weighty issues on his mind all the time, things that
may keep him up at night. But when asked in an interview from the Haas
Center over at Berkley, he wondered what keeps Larry up at night.
In this case, it’s his dog who is kept up night by the raccoons, which
in turn sort of spreads throughout the house. So that’s the primary concern.
Not net neutrality or another weighty issue. So please use the Q&A mic to ask any questions
that you may have towards the end of our talk for the benefit
of our YouTube and virtual audiences.
With further ado, please help in welcoming Larry Downes.
Thank you very much. LARRY DOWNES: Thank you very much.
It’s a pleasure to be back at Google talking about the new book.
I want to sort of just suggest how I got involved with this idea in the
first place. One of the things that I like to do to try
and keep current with technology, which of course, is pretty much
impossible these days. But I like to look at as many different sources
as I can for information.
So I read both from sort of business press and mainstream press, as
well as technology press. And when I find something I like, I print
it out and put it aside in a pile.
One of the things that I noticed over the last couple of years was that
more and more of the stories that I was clipping out were in fact
stories about the relationship between technological development
particularly, obviously, information technology and the law or legal
system, regulators, courts, the lawmakers administrative law, and so
on. And most of those stories were bad news.
They were mostly stories about how things weren’t working, and how
these conflicts were becoming bigger and more expensive between the
legal system and the technological applications that were being
developed in very rapid order. And as I started collecting more and more
of these stories, I thought, well, there’s something going on.
I’m not quite sure what it is. But clearly something interesting.
And the one that sort of got me to be — kind of, the “aha” moment was,
now talking about the earlier privacy flap at Facebook. They’re have
been now two since the one I’m going to talk about. Including
yesterday when Mark Zuckerberg announced that privacy, he didn’t think
was all that important. So proving that — if there is a company that
has worse public relations and government relations than you,
it’s Facebook. But the first one, you may remember, this
was back in early 2009, February, I think, of 2009, when a sort of
weird kind of rebellion emerged.
What happened was that Facebook made, what actually turns out from a
legal standpoint modest and very minor change to the terms of service,
dealing with the information licenses that the company expected of the
users, particularly after they left the site. And you know, this is typically happens in
large technology companies. What I presumed happened was the lawyers,
you know, wrote the change. The change, you know, went through the regular
process. It seems unlikely it’s the kind of change
that would normally have even gone through an executive team review.
As I say, pretty modest legal stuff. And they posted the — they posted a notice
saying, we made a change to our terms of service.
Well, you know, it’s Facebook. There’s 800 zillion people.
And so, as it turns out, somebody actually read it.
And it turns out, I think, that the person who read it probably wasn’t
a lawyer, didn’t understand exactly what it read but the language was
disturbing to them. And, of course, this is one of the problems
with terms of service agreements is they’re intentionally written
to be unreadable even by lawyers.
They’re often — they’re cut and paste jobs. And one of the exercises I often do with my
law students and my non-law students is just pick at random terms of service
agreement and print it out and actually read it.
And, you know, how many times there are typographical errors, terms
that are sort of, you know, capitalized but never defined anywhere.
They’re really quite bad documents. And frankly, it doesn’t matter because 99.XXX
percent of the time, if something goes wrong in the relationship between
the user of a service and the service, the reference back to that
document doesn’t happen. I mean it gets resolved other ways.
In the interest of good customer service, we’re going to do X or Y or Z
regardless of what the terms of service say we can or will do.
Generally speaking, we don’t go back to that document unless things go
really, really wrong. So that’s probably, you know, why nobody really
paid much attention to this.
But as I say, somebody read it. Misread it, I think.
But thought that it suggested that Facebook was taking additional
rights without compensation for those rights. And, of course, this being Facebook, the way
they responded was by creating a Facebook page called Facebook Users
Against the New Terms of Service.
And within a couple hours, there were a hundred thousand members of
that page. Now for Facebook, a hundred thousand members
isn’t really very much, frankly.
But it was enough to scare the hell out of Facebook.
And particularly because, of course, the mainstream media picked up on
it. All these really embarrassing headlines, you
know, Facebook Falls on Its Face, you know, that sort of stuff happened
pretty quickly. And a number of really interesting things
happened immediately after that.
First of all, Mark Zuckerberg announced that they were going to
withdraw the change — the changes were being withdrawn — the terms of
service, those disappeared immediately. And more importantly, he made this announcement.
He said, look, in the future, we’re going to treat the terms of
services in a very different way. So, first of all, we’re going to write it
in plain language. Of course, whatever natural language the audience
prefers, but for now let’s call it English.
We are going to write it in English, and in the future any time we want
to make a significant change to the document, we’re going to institute
a process that will kind of try to introduce some form of democracy or
at least deliberation among the user community before we actually
implement the change. And one the things that happened in the later
change to the privacy policy which, of course, blew up in their
face a couple of months ago, was that they actually circulated the proposed
changes according to this new process.
But I think because it wasn’t really well-advertised, they weren’t —
there was a trigger point. To get a vote on a change to the terms of
service — you have to have many users respond that they want a vote,
and it didn’t meet that threshold.
So it never went for a vote. And then, of course, following their procedure
in October or November or whatever it was that they introduced the
new privacy policy. Lo and behold, of course, the world blows
up a second time for them. So — but I thought that this was really an
important moment. And one of the things I thought in particular
that Facebook recognized was that in an online community — and particularly
one as large as they are — there is a sort of sense that
this is, not a country, but some kind of a social organization.
Obviously, it’s a social network. It’s some kind of social organization that
has laws. That has rules.
That has in some sense a government around it.
And one of the things I think that was interesting was that they
realized that when you have the terms of service, for better or for
worse, becomes effectively the constitution of that community.
So that’s the main sort of governing document that determines the
rights and obligations. The responsibilities between the sovereign
— in this case Facebook — and the citizens — in this case the 300-
400- 500 million users — and that obviously as you move the technology
from, you know, buying and selling cars or, you know, trading on futures
and commodities to someplace where people are actually coming
to interact with each other and to form relationships and become, you
know, in some ways digital citizens.
The idea that, in this case, you would have a document that simply
enforced and forced upon the community without any deliberation,
without any representation. So it’s a sense of — it was a form of tyranny.
And this sort of rebellion, a hundred thousand people rebellion, was
kind of the beginnings of a recognition that the governance of digital
life was going to have to take on a much less tyrannical and a much
more democratic look. Because otherwise what happens when you have
people who are governed by a government that they didn’t elect, that
they don’t feel represented by, and they don’t like?
Well, you have revolution. And revolution, I think, was the thing in
the back of their minds at Facebook that got them to react as quickly
as they did. Not so effectively, but certainly quickly.
And that’s because what is the value of Facebook? I mean, we go to their offices, you look,
you know, there’s no gold bullion.
There’s no factories. There is no manufacturing.
The entire balance sheet, the entire asset of the company is
information, much like it is for you. And in their case, all the information they
have, at least all the valuable information they have, is provided
by the users. So if the users are unhappy, this is not like
a regular country. If they say, well, we don’t like the government.
They’re really not going to pick up and move — well, I might go to
Canada, but it’s not — it’s two hundred million people just can’t pick
up and move somewhere. Well, of course, online, they can.
It’s not easy. But it’s much easier than it would be in the
real world. And they could move to MySpace or LinkedIn
or somewhere else, if they didn’t like the government that they were
getting from Facebook. And, of course, the minute they leave, the
company doesn’t exist anymore.
There is literally nothing there without the users and without the
information that those users provide. So this was the moment when I said okay.
I think now I get what all those stories I was clipping out, what they
all add up to. And what they add up to is to me a sense that
we’ve now kind of progressed far enough in Internet life, these
are ten years that we’ve been developing applications and services
in the Internet, that we’ve moved into this world where instead of talking
about, you know, business to business or business to consumer,
and even consumer to consumer.
It’s now really moving into a much more interesting and intimate set of
interactions, social relationships, economic relationships, and so on.
That we now have to start thinking about a second life or a digital
life that we lead and what the government of that digital life or what
the — not only the constitution, but then all the laws that go with
that to set, you know, the specific terms of interactions, what that’s
going to look like And one of the things that clearly not to
look like is the sort of law that we have in the physical world.
Many of the stories I clipped suggest that the way in which we interact
in our digital lives is so different than the way we do things in
physical life that trying to apply the metaphors, trying to apply the
legal assumptions and trying to use the legal institutions, you know,
courts and legislatures — very slow, very deliberate, very expensive,
very methodical — that just sort of set of institutions is an
extremely poor fit for the kinds of problems and the quantity of
problems that we experience now as we develop this digital life.
And I know a little bit about digital life, as Cliff mentioned, I’ve
been writing in this space in particular for many years.
My first book, the Killer App book, this was kind of looking at how the
Internet was going to effect businesses. It didn’t say much about consumers.
I certainly didn’t say much about social systems. But because it was very early on.
It was 1997, when I was writing, predicting that, you know, even then
it wasn’t really too far out there. Predictions certainly now it seems completely
cliché, but my prediction in 1997 was the Internet was going to significantly
change the way people do business.
Okay. Well, great.
That’s was — maybe interesting in 1997. It’s obviously not so interesting to talk
about today. But I thought one of the models that I’d come
up with there was going to be, I thought, useful in talking about
now ten years later. How is law going to evolve both in the physical
world, but more importantly in this new world?
What is the legal system? And how’s it going to develop and indeed how
— what should we be doing to make sure that it develops in the best,
more efficient, most democratic most whatever your set of values
is for that. How can remake sure that that happens as quickly
and as efficiently as possible?
One of the models that I liked from the original book was this sort of
recognition. Looks very scientific, isn’t the least bit
scientific, but the fact is that when you have a disruptive technology,
it’s one where the pace at which it changes things is faster than the
ability of the underlying people or businesses or social systems to
respond to. In fact, that’s sort of my definition of a
disruptive technology. It’s one where its ability to change outstrips
the capacity for change of the people who are effected by it.
So you’ve got on the one hand, you know, sort of got to stick with
digital technology, you’ve got it changing — and we’ll talk about why
in a second — at this essentially geometric or exponential pace.
Those of us in the real world, if you can think about how you adapt to
change, it’s not exponential. Right?
We’re much slower at it. And our institutions are much slower at it.
And I thought that the problem or the opportunity in Killer App was
that somewhere in that gap, kind of the preferred rate of change and
the potential rate of change, companies could come in, introduce new
products or services and upset old supply chains.
Upset old sets of very stable industries could be destabilized.
All of these things were possible just by moving a little bit more
quickly than everybody else. Well, obviously, that’s what happened.
Again not, not a, you know, brilliant prediction on my part.
But at least I tried to put it into some terminology. The terminology I used was the Law of Disruption.
Where I said that in this case, when you have disruptive or digital
technologies changing exponentially but you have social, legal, and
economic systems changing incrementally, you’re going to have a kind of
set of problems. You’re going to have a set of interactions
that are going to prove to be disruptive.
You’re going to have these accidents somewhere in the intersection
between the two. And so I pulled the law of disruption from
the old book and I said all right now it’s ten years later.
Certainly the business systems have changed, how about the legal
system? What — what’s happening now?
Law is sort of — historically, when you look at disruptive technology,
law is always the last of these systems to change.
It’s always the place where people retreat to try and hold back change
as much as they could. But eventually law goes through this sort
of same kind of significant transformation that we’ve now observed over
the last ten years, I’d say, in business.
And, in fact, I think you clearly see over the next ten years kind of a
revolution in how we even think about our legal institutions and our
legal systems, similar to the way we’ve had over the previous ten years
in business and industry and the economy, in particular, the
information economy that we’ve developed. All right.
So this is a part where in a regular audience, I would spend the next
ten minutes talking about why digital technology is disruptive.
I think I can probably skip that for you guys. Moore’s law, Metcalfe’s law.
So I’ll do it very, very quickly. Moore’s law, Metcalfe’s law.
Put them together, you have a disruption to the pace of change.
Obviously, if you sort of think digital technology changes along the
same path as Moore’s law, put that together with Metcalfe’s law, put
that together with the weird information economics or information not
as scarce, good. The more it’s used, the more valuable it is.
It doesn’t get used up. It has it’s own economic —
Put that altogether and you get a recipe for, now ten years of
disruption, but certainly many more decades to come.
I have this wonderful story I tell to make this concrete.
Again, I don’t need to go over this with you. If you take the commercial sold computer,
that’s the UNIVAC I. If you gave that a unit measurement of one,
you said, a UNIVAC is one computing power — and even though Moore’s
law didn’t exist in 1955, let’s just pretend it did — and we apply
it and we start running Moore’s law to the year 2000.
And you said Sony Playstation 2, which debuted in 2000, would be —
very rough measurements here — but roughly equivalent in computing
power to 22 million UNIVAC I’s. If you wanted to buy 22 million UNIVAC I’s
in 1955, you would need an amount of money that — that exceeds the GDP
of the United States in the year 2000, not adjusted for inflation.
Obviously, the Playstation 2 is much smaller and cheaper and faster
than 22 million UNIVAC’s, and also interestingly enough, was not made
for — the UNIVAC I, high, big applications, lots of number crunching.
The first one was sold, in fact, to General Electric for payroll
systems and other accounting system. Obviously, the PS2 is made for something a
little bit different. But when you start, you know, continue to
double a number and you start with a small number.
The initial doublings aren’t very interesting. Keep doubling the big number now, and every
next generation of change gets that much more disruptive because you’re
doubling a bigger number. And so if you run this forward to the present
take the Playstation 2, say that’s 22 million UNIVAC’s, to store them,
you would need a space about equal to the city of Seattle, Washington.
Not stacking them, just laying them end to end.
If you move forward to 2005, that’s only five years now, not 50 years.
2005, the Playstation3 — again, rough measurements — 660 million
UNIVAC’s. You’ve gone from 22 to 660 in five years.
Cost pretty much stays the same. Size, you know, the front chip and the size
gets smaller and smaller. And if you wanted to store 660 million UNIVAC
I’s, you would need about the entire state of Washington just to put
them somewhere in the box that the Playstation3 goes.
And the amount of money you would need to buy 660 million UNIVAC I’s in
1955 would be more than the entire money supply of the world today.
So literally, it wouldn’t have been possible to do it.
So I just ran through that in. Usually I take about 15 minutes with that.
All right. So we understand that it’s disruptive.
And I think it’s clear that the legal, the sort of legal institutions
and legal systems, are now feeling the pressure of change that
everything else, all our other systems have been feeling much more
directly in the sort of first ten years. And one of the questions that I was asked
when I started thinking about this book and started proposing it to the
publishers was, okay, great. We love this.
Now your book is going to tell us, right, what the new legal system is
going to look like? And who are going to be the winners and losers
five years from now? You’re going to be able to lay all that out
for us? And I said no.
I can’t do that. That’s sort of like asking me, you know, the
Wright Brothers just took off at Kitty Hawk and you want to know, you
know, will United or Southwest get better gate placement at Oakland
terminal two in 2000 — I just — you know, it’s just not possible.
But I think it is important to try and find ways to predict.
And to me, the most valuable tool for trying to see how something is
going to happen is to find historical analogies, historical metaphors.
Obviously, they’re not perfect by definition. But I think they could be very useful.
I like this quote very much from Fredric Jameson, who’s a literary
critic. And he says, you know, really, if you think
about it, science fiction is a kind of nostalgia for the present.
That the way people generally write about the future really isn’t about
the future, it’s about the present, set in sort of some other place or
time in order to talk about things that you couldn’t really talk about
directly. So thinking about the future is not very useful
in trying to predict the future.
The past, I think, is a much better guide. And this quote I also love from — from Ronald
Coase. Any of my students will know my affection
for Professor Coase Nobel Prize winning economist, who said, if you
torture the data enough, nature will always confess.
And so again, trying to make predictions based on trends and future
trends — You can make the predictions.
But your tendency even unconsciously to skew the data or to interpret
the data in a way that gets you the results you wanted to get is such
that it’s not a very useful way of doing prediction. All right.
So how better to do it? I like to say look to historical examples.
And for me, the most useful way of predicting what’s going to happen in
this age of disruption is look at the previous large scale age of
disruption. And for me that would be the Industrial Revolution.
We have some very similar characteristics. I mean you think about the information revolution
being powered by semiconductor.
On their own computers, don’t do anything. They’re kind of a machine that makes other
machines. Very similarly, in the Industrial Revolution,
you had a key technology, the steam engine, on its own it didn’t do
anything. But it became the basis for manufacturing
technology, transportation technology, communications technology.
It was sort of the — the chip of its day. And in particular, I think it’s useful to
look at the Industrial Revolution with the standpoint of how railroads
developed. So that was one of the key technologies, or
key applications I should say, of the steam engine.
What can we learn from how that affected legal systems in particular
that might suggest how the semiconductor is going to design a new legal
system for us in our digital lives. And I love this — is the map of the U.S.
railroad system in the year 1900.
You will observe something about it pretty obviously from the very
beginning, which is there’s all kinds of congestion. And you can think of this as competition in
a business sense. There’s all kinds of competition particularly
in the Northeast and the Midwest.
And all pretty much until you get to the Mississippi River, if you’re
try to go shift from Point A to Point B you have many, many choices.
All right? You have lots and lots of competition.
But west of the Mississippi to the Pacific, you have many different
routes. But each of those routes takes a slightly
different path through what’s known as the Intermountain region, the region
between the Mississippi and the West Coast.
And this translated to a very, very significant social problem in the
year 1900. And that was that because the railroads in
the congested part had to compete so viciously with each other, essentially
there was more capacity than anybody could possibly use in
the dark part of this chart, that they were losing money.
They were losing huge amounts of money on the transport up to the
Mississippi. And the only way they could stay profitable
was to make it up in the Intermountain region.
And the way they did this was by charging, you know, excessive rates of
carriage to everybody that was stuck with only one line.
So if you’re living in Spokane, Washington, you have exactly one way of
getting your timber to the Pacific or even back to the Midwest.
And that’s the Great Northern Railroad. So the Great Northern Railroad said, Spokane,
you’re going to pay, you’re basically going to subsidize our loses
everywhere else. And this is what all the transcontinental
railroads did. And this in turn led to a tremendous amount
of social unrest. So the Progressive Movement, the Granger Movement,
the Socialist Movements — many of these Industrial Age, sort of, developments
in terms of calls for radical or some less radical changes to
the way law worked, and the way governments were run more or less came
out of this particular feature of the railroad system.
You know, squeeze people long enough, they’re going to revolt.
They revolted in a lot of different ways. Some of them civil, some of them not-so-civil.
Some of them nonviolent, some of them violent. And the Granger Movement in particular was
trying to force Congress to pass laws that would make railroads behave
more like governments. They said, look, the railroad is effectively
a sovereign, we have no choice but you to deal with them.
They govern our behavior so significantly that they ought to be held to
the same kinds of standards as a democratic government.
You know, sounds like the Facebook story, right?
Exactly the same thing. They were successful in the United States.
Just as an aside, they weren’t — didn’t work so well in other parts of
the world. Like the Russian Revolution, in some ways
as the violent equivalent of the Granger Movement or the Progressive Movement,
where the workers simply took over the means of production and
formed their own government.
And by the way, the difference between how the West and how Russia
resolved this Industrial Age problem, in some ways, that determined the
course of history for the next hundred years. But why in the United States in particular
did it take a nonviolent form?
Well, the answer is largely Teddy Roosevelt. And a group of his advisors — they were,
essentially, they were conservative, if you wanted to put a political
label on them. They were not radicals.
They were not militant. But they recognized that there was enough
pressure on the economic system because of the way the railroads were
behaving, that if there wasn’t some valve to release that, there would
in fact be the kind of violent revolution that ultimately took place
in other parts of the world and particularly in Russia.
So Roosevelt essentially became a progressive. We became the great trust buster.
Not because he was antibusiness, but because he was concerned that the
alternative would be the complete collapse of, sort of, the government
and the economic system of capitalism that was causing that this
stress. And in particular one of the — the principle
advisors to Roosevelt on economic matters was a very strange man named
Brook Adams. Brooks Adams, the grandson of John Adams,
the great-grandson of — sorry.
The grandson of John Quincy Adams and great grandson John Adams.
So from this, you know, family of people who understood revolutions
against tyrants pretty well, by his generation, of course, the tyrant
here was now the railroads. And Adams developed a theory which he used
in fact as a lawyer. He argued on behalf of the City of Spokane
in the case that was eventually decided by the Supreme Court which
did determine that the railroads were unfairly discriminating economically
against the Intermountain region.
Of course, that was a new legal principle that there could be such a
thing as economic discrimination. And Adams was sort of one of the people who
spearheaded that theory. And his quote from his brief into the Interstate
Commerce Commission, I thought, really summarized my sense of how
this relationship between disruptive technology and legal systems is
going to play out now, a hundred years later.
So he says, you can read it for yourself. He says, “No ancient abstract principle of
right and wrong which can be safely deduced as a guide to regulate the
relations of railways and monopolies among our people, because railways
and monopolies are products of forces unknown in former times.
The character of competition has changed and law must change
to meet it or collapse.” And that’s essentially Roosevelt’s view in
a nutshell. If the law doesn’t change to meet these new
forces, these new disruptive technologies, the law will simply
fall apart. We will get a new legal system, but we won’t
get it in a very nice way. And sure enough, I think that’s, you know,
that’s sort of forms the basis of the theoretical part of the book
is this recognition that we have these new forces.
The law is ill-equipped to deal with them. The law is either going to change or collapse.
And obviously the goal of the book is to try and suggest ways going
forward in some of the most contentious areas to today to make sure
that it does change and it doesn’t collapse or at least that the
collapse is as orderly as possible going forward. So this is just a short list.
Some of the kinds of issues that I cover in the book.
But obviously these are some of the things that are kind of at the
forefront of these conflicts now between the body of law that we live
under today, and the reality that technology has created in the last
ten years to which those simply don’t fit. And I tried to sort of draw just to close
out the Industrial Age analogy, I said, look if we’re really talking
about what happened in the Industrial Revolution driven by a steam
engine. Essentially, there was a new law created.
And I mean this case I mentioned is a big piece of it.
There was lots of other things but if you sort of took the whole
progressive era and what came out of it and put it altogether, what
you’d say is essentially the law changed dramatically over a 10,
20-year period. And really we went from essentially what was
still kind of based in feudal society and feudal law.
Particularly in Europe and in some sense the United States, where law
was really organized around property ownership, real estate property
ownership, and the relationship between the owners of property and
people who lived on the property. So the tenants, the servants, the serfs, the
farm community and so on. Really what happened after the Industrial
Age was the legal system moved from kind of a feudal model based on
property, to a property model based on actual exchange of property.
So it became much more based on, you know, the market system and
capitalism and entrepreneurship. And the whole idea of manufactured goods and
so on. That created a new legal system.
The property system really replaced feudalism. And now in our current era, we’re going to
do through a similar change property-based system, again, the idea that,
you know, exchange of goods and services in an open market and the
legal systems that support that, we’re really moving much more toward
— I don’t really have a good name for it yet.
I used to on this slide earlier, I called it a sort of the
collaboration model of law, but then people thought I was a socialist.
So I took that off. Now I call it the network version of law where
somehow, we need to observe new legal system that’s founded in
the idea that information is a very different kind of commodity than oil
and steel and farm commodities.
Again, because, you know, I use that barrel of oil, that means you
don’t use it. When I’m done with it, it’s gone.
All those kinds of things really are at the heart of the sort of
property system of law. Information doesn’t follow any of those rules.
And therefore, the kinds of legal system we need to support an
Information Economy is going to be very different. What’s it’s going to look like, well, I tried
to organize the book around what I thought of as the three biggest
areas of change. So obviously, private law has to do with our
interaction as consumers or citizens, certainly as individuals and
things like privacy. Things like civil rights, human rights, government
surveillance and so on.
Things that happen at the intersection between the physical world and
the digital world. That’s sort of the first section of the book.
The middle section of the book, I talk more about, about a public life
in particular, the sort of regulation of business. The regulation of competition, antitrust is
one. The actual infrastructure itself.
So everything having to do with regulation of the Internet or all the
companies that provide access and infrastructure and the backbone.
And then, of course, crime — both personal and business crime.
Identity theft and spam and things of that nature.
Again, what’s a more appropriate kind of legal structure to respond to
that, than the one we have which obviously doesn’t work.
Actually, I live in the very small — brief aside.
I live in a very small piece of unincorporated Contra Costa county,
just north of Berkley. A little town called Kensington, 500 residents.
And you get the little monthly newspaper and it gives you sort of the
whole police blotter. We have a little police force.
A couple of part-time officers. And every — you know, most of it is somebody
left their car unlocked and CDs were taken out or somebody left their
garage unlocked lost some tools.
Every now and then there’s a reference in the blotter to police took a
call from resident of such and such street that they had been the
victim of identity theft. Now you actually have to do that because your
insurance company requires you to file a police report if you’re
going to make a claim. But imagine again the 2 officers, part-time
officers, in Kensington, California, yes, I’ve been a victim of identity
theft. Yeah, we’re going to get right on it.
What on earth could they possibly do? Just the mismatch between the skill sets,
the tools, the jurisdiction, everything about a local police force in a
town of 500, and sort of a global enterprise.
This just — you know, great. Duly noted.
All right. So the third area, which obviously is amongst
the most contentious is what I call information life.
This is really at the heart of it. This is the court understands legal system
that’s evolving to deal with this new economy which is based on information,
which, again, follows a lot of economic rules that are very different
than what we’re used to from scarce goods like oil and corn and so
on. So obviously, everything having to do with
copyright, and patent, and particularly with the law of software or information
products themselves.
This is, you know, sort of central to the message of the book.
We know, I mean, you know this far better than I do that these are
areas of great contention. And of course the sort of escalation of problems
that happens kind of matches again the Moore’s law curve, the faster
things change, the more — you know, if you’re thinking next
year it’s going to quiet down, you are not looking at the chart correctly.
One thing you will know for certain is that there will be more
conflicts next year and there will be more conflicts the year after
that. Ultimately, you know, we will evolve some
new way of regulating information that will make better sense.
I’m not criticizing the copyright system. It was fine for what it was invented to do.
It just doesn’t work in a digital, non-media based information exchange
market. It wasn’t designed to do it so it’s not like
anybody should be blamed or yelled at.
But it doesn’t work. And we know it doesn’t work.
And one thing everybody agrees on, you get a bunch of patent lawyers in
a room together and the one thing they’ll all agree on is that patent
system is completely broken. And in fact, you pretty quickly get them to
agree, at least half of them to agree, on what the solution would
be that is the ones for information technology have a pretty good
idea of the fix and unfortunately, the ones from the pharmaceutical
companies have a completely different idea of what the fix
is. And frankly the reason that there has been
no significant patent reform in Europe or the United States over the last
ten years is because essentially you’ve two competing bills every
year that come up that say no, we’re going to do the pharmie fix —
we’re going to do the IT fix, and they wind up doing nothing.
So everybody knows it’s broken. And it’s not you know, not meeting any of
the goals or expectations that we have for it.
But the chances — I just was at CES in Las Vegas last week at a policy
conference. And Congressman Issa from Southern California
said the chances for patent reform next year are not only zero,
but for the next three years are completely zero.
And by the way, the result of is that when things break, it’s if the
law doesn’t fix them, where do you go? Who fixes it if the legislature doesn’t fix
it? What’s the sort of the backstop?
Yeah, the courts. So if something goes wrong, and the law isn’t
fixed, you sue. And you go to court and what we have in the
patent system as well as in a lot of these other systems is we have the
worst, institutionally, the worst group of all, you know, sort of judges
— not that they’re bad people.
But they’re the ones who are least able to as a fact finding.
When they have to make a decision, it’s supposed to be based just on
that particular set of facts and circumstances. But of course, it winds up having broader
implications. And so by default, we get lawmaking by the
courts or by judicial decisions.
Nobody thinks that’s a good idea. And we think about poor Judge Green, running
the communications network of the United States from his chambers after
the AT&T divestiture case in the 70s, until Congress — well, 80s, sorry.
Until Congress passed the 1996 communications act, poor Judge Green was
running the communications business of the entire United States out of
his judicial chambers. And it was just — believe me, it was not
a job that he wanted or enjoyed.
But because he was responsible for enforcing the antitrust decree and
because Congress didn’t pass any legislation until 1996, he ran it for
ten years. And we know that those were not good ten years
for communications. Where we had separate companies that were
only allowed to do data and other companies that were only allowed to
do voice. And all of that became so artificial, as the
Moore’s law did its thing that, you know, the system just became unworkable.
Well finally anyway. There was some movement.
At least it’s out of the courts. Now it’s back in the Congress.
So I thought what I would do, I want to leave some time for questions
but I thought I would just say a little bit in particular, just to give
one example from the book of how I think this breakdown occurs, and
then a way going forward is to look at intellectual property broadly.
Obviously, that’s probably the area here that’s of most interest to
Google. And again, to look at historically how disruptive
technologies have created these kinds of legal crises.
And then sort of what eventually gets evolved, and what eventually is
created to try to come up with a legal system that much better fits the
physics of the — what technology has created. What technology has wrought.
So you go back, obviously, to most the important technological
development in information, certainly before the computer was the
printing press, moveable type and so on. Guttenberg, 1450.
And one of the things that you realize right away was there’s an agenda
here that’s much more important than just the business agenda right?
So why did Guttenberg invent moveable type? What was his actual goal?
Was he selling books? He wanted to make money as a bookseller?
Well, in part. But here’s a quote from Guttenberg about the
importance of the printing press.
And one of the things you realize is that he had a much broader social
goal, in this case, a religious goal. Guttenberg was a Lutheran.
And one of the tenets of Lutheranism, of the whole Protestant
Revolution was that the Church — sort of, think about it, the Catholic
Church in the Middle Ages was kind of like Microsoft Windows.
It was in a closed environment. There were little bits of API, but that was
about it. You really couldn’t, you know, it was in Latin,
you couldn’t get educated in Latin.
The priests really controlled information and how it was used.
And essentially, their competitive strategy was to limit access to
information as a way of keeping their customers coming back for more.
Luther turned that upside down and said, no, you know, give the
information away. So he was the open source guy.
He said give the information away and find technologies that will do
that, and you will wind up with creating more value for yourself than
by keeping it closed. It really the kind of same fight that we have
today. In this case, and I frankly think historically
in all cases, the open model ultimately wins.
In this case, there were 300 years of war to sort of resolve the
problem. But ultimately the open model wins largely
because the technology makes that inevitable.
So there’s Guttenberg in 1455. And as the sort of printing press — as we
had this sort of revolution, one of the things we realized again, in a
closed society, we didn’t have to have rules about copies manuscripts
because that copying was so closely controlled by the owner of the manuscript
it was just irrelevant.
But as the printing press evolved, and as we continued to get more from
liturgical books to secular books, it became clear that there needed to
be rules about who could do what and the sort of economics of this were
very important. So exactly 300 years — this is the 300th
anniversary of the very first copyright statute.
The British statute of Anne. And a copyright said you know it’s still really
the basis for copyright law today, this idea that we’re going to encourage
authorship. We’re going to encourage the creation of information
by using this very clever hack, which is to say, we’re going
to temporarily give a monopoly power to the person who originates
new information. And there’s lots of limits on what you can
— you know, not all information gets this monopoly power.
If I write down my directions to my house, that’s — that doesn’t get
controlled by copyright. But if I create some interesting information,
some useful information with some sort of significant addition to
human life, I’ll get a monopoly power to control its distribution,
the Catholic model, but only for a certainly period of time.
After which, the whole thing reverses, it goes into the public domain.
Anybody can do whatever they want with it, the Protestant model.
The idea here was that this would give incentives for more information
creation, and at the same time make sure that we were feeding the
ultimate goal of as much information flow as possible.
Statute of Anne set its own set of rules. Well obviously, what’s happened over the years
is that the technology for both creating and distributing information
has changed. And in response, the laws had to change, you
know, to make sure to keep that balance or at least the goal is to keep
that balance. The law keeps changing in response.
The problem, of course, has been that over the last hundred years the
pace at which these new developments come in that upset the balance
just gets faster and faster. And the law still takes a long time, so it
falls further and further behind.
So you start to look at a number of major radical disruptive
technologies, each of which so upset the balance that a major reform
was ultimately needed. [INAUDIBLE]
Obviously, in terms of music and entertainment now in 2001, and what
you want to think of, you know, that’s pretty clear — oops.
I missed a chart. Oh, I see.
I must have left it off. So one of the things you find that’s pretty
clear is that the system is — the pace of change has outstripped the
pace of reform to the system and now it doesn’t work at all.
What we’ve got, of course, now is a system where instead of recognizing
that information is cheaper to create and cheaper to distribute, we’ve
done the exact opposite. The length of copyright and the kinds of enforcement
in a civil and now criminal penalties for copyright infringement
have become more stringent, even as the cost of creation, distribution
has gone down. Of course, the cost of privacy has also gone
down. But that is the only thing so far that the
law responds to. It doesn’t respond to these other features.
And the analogy I use to talk about copyrights is essentially, it’s as
if every time cars got faster, we lowered the speed limit on the
freeway in response. You know, because we want to make sure there
are fewer accidents, so that’s certainly one goal.
The problem is as we’ve done that, the cars get faster and the speed
limit goes down and basically we now have a freeway where the speed
limit is one mile an hour. What happens when you have a law that’s completely
unrealistic to reality is nobody obeys it.
So effectively, we have a copyright system and, you know, for all
intents and purposes, it has no basis — no value in terms of how
people behave. It doesn’t effect their decision to do one
thing or another thing. You know, you can pick off individuals every
now and then through litigation.
The bottom line is that the system is now without a governing body of
law. It’s kind of, you know, the market is setting
certain rules and certain terms.
And again, every now and then there’s a piece of litigation for —
obviously, the Google/Viacom case still pending is an attempt to try
and enforce the one mile an hour speed limit on a 55-mile an hour
vehicle. Ultimately, those things may have some influence.
But really what’s determining the law of copyright today — or the use
of information has nothing to do with the copyright law it has
everything to do with the market forces. And just to, sort of, close it up, in, you
know, in my copyright chapter I sort of said, well, here’s three
what I think of as modest reforms.
Again, kind of in the Brooks Adams model of things what we actually
do — by the way, there’s absolutely no chance any of these things
would happen in Congress today, anyway. But not because nobody thinks there’re a good
idea just because the political will wouldn’t be there.
But in fact, if we wanted to actually turn the copyright system into
something that worked in the digital economy, I think, you know, sort
of three things that would have a great deal of help.
There one would be dial back on the extension of copyright, to put it
back to a reasonable term, reasonable enforcement, reasonable
penalties. People will maybe obey a law that they think
makes a certain amount of sense.
Restoring the concept of fair use, of uses that don’t have to be
licensed. Licensing can be very expensive and time-consuming
process or as economists say, they have lots of transaction
costs. And we’ve judiciously eliminated fair use
in a series of decisions in this country over the last ten years.
Many of the things that people sue about today, they wouldn’t have to
sue about or they wouldn’t sue about because effectively they should be
covered by this general free license of fair use.
If we put that back in the law, we would avoid a lot of the conflict
right away. And then thirdly, many of the features of
the DMCA, the Digital Millennium Copyright Act, passed in 2000,
particularly ones that make it, you know, illegal to reverse-engineer
DRM and some of the more draconian features of DMCA.
Take those out those. Three things I think would — would kind of
be the Granger version of copy reform as opposed to what we’ve got now
which is the Russian Revolution of copyright reform.
And as I say, there’s no — there’s no Theodore Roosevelt on the
horizon, that I know of, that’s going to make that happen.
But, you know, if the conflict gets increasingly hostile, maybe
somebody will come up to do that. All right.
So I’m going to stop. Yeah, I’ll leave it here.
This is just sort of the cheat sheet if you — for questions, this is
kind of a bunch of current issues. And the thumbs up is, you know, thumbs down
kind of my view — my viewpoint on them.
My viewpoint in this case always coming from kind of the general theory
I just laid out for you. What makes sense and what doesn’t make sense.
Kind of generates, I think, the thumbs up and the thumbs down.
But I’ll stop there we can just sort of talk about whatever you want.
Take any questions on any subject this or otherwise that you’d like.
So I’m going to stop there and see if there’s any questions. [PAUSE]
Okay, former students are required to ask a question. [PAUSE]>>I remember — I remember when you came
out with your first book you put it all online.
A lot has happened between 1999, back then and now.
Are you doing that now with your new book? And what are you’re thoughts on that? LARRY DOWNES: So the short answer is no.
I didn’t put — and one of the reasons I was able to put the Killer App
book — this was 1998, actually, when it came out.
We had a website where we literally put the entire book online for
free. We used a tool that made it so you could only
read a section at a time or a chapter at a time.
So it wasn’t really — if you wanted to read the whole book online but
it wasn’t really to print it out and make — and of course the only way
we were able to get away with that was that our publisher didn’t
understand that that was possible. And frankly, didn’t know that we had done
it until too late. The cat was out of the bag.
Well now publishers are much more sophisticated about that.
So I was not able to do that with this book. But what I have done, and actually I’m learning
a lot from the process is, that — that since, you know, about a
month or two before the book came out, I’ve started blogging.
And I put myself on a pretty aggressive schedule of at least two
significant posts a week. And my posts — they turned out — they turn
out more to be like article s.
They’re 1000, 1500 words each, which breaks all the rules of blogging.
They’re very long posts. But I’m trying to sort of keep up with things
that have happened since I stopped writing the manuscript.
And effectively, if you read my blog, I’ve now written more words on
the blog than the manuscript, the text of the book.
So I’ve actually written the next book. It’s not organized — it’s just sort of just
by topics. But in terms of word count, I’ve now put up
again online for free more content than is actually in the book itself.
That’s the closest I could come. [PAUSE]>>All right.
I had a question as well. I really enjoyed the parallels you made with
the road railroad company and Theodore Roosevelt.
In today’s society with all the collaboration that’s going on the
Internet and how things are really crowd-sourced, do you think it is
going to take another Theodore Roosevelt or is it going to take a
Theodore Roosevelt network of like-minded believers to change things? LARRY DOWNES: Well, so, as I said, it depends
upon what route ultimately we go.
If we go the progressive route or we go the revolutionary route.
As I say, right now it’s a revolution. So far, it’s a nonviolent revolution.
But it’s nonetheless, you know, you can sort of — it’s not too far to
think of people, you know, there are many public advocacy groups in
Washington. And sort of their — you know, they use pretty
violent rhetoric at least when they start talking about some of
these issues. And it’s not sort of far to think you know
people going to the barricades for copyright reform.
It seems kind of foolish to think of that now, but I suggest in five
years, if we haven’t made any changes to the law that won’t sound quite
so ridiculous. So if we are going to going the correct way,
the progressive way, yeah, of course, the, you know — how do we develop
a new law? Well we obviously are going to use the tools
available. So we’re going to develop it on Wikipedia
and Facebook and Google. We will use — just as the Facebook little
rebellion used Facebook to — we will use the exact same collaborative
model for developing what seemed like a better set of rules.
And therefore a better set of code, better set of principles for
governing our digital life that seems — that seems quite
straightforward. The tools are there.
Now the question is, you know, are the ideas there and is the ability
to implement and enforce them and kind of keep traditional governments
out of the way in the process. Is that there?
That’s the $64,000 questions.>>So the first thing I noticed on this chart
was the thumbs down for network neutrality.
And many others may have noticed that as well. But could you elaborate a bit on that? LARRY DOWNES: Sure.
So I have about a half a chapter in the book where I talk about
infrastructure in particular but net neutrality. I should say I’m not opposed to net neutrality,
at least the principles of net neutrality.
My concern and it should be fairly obvious now why that would be, is
particularly with the idea that it would be both implemented and
enforced by the Federal Communications Commission. The idea again here that a terrestrial sort
of earth-bound governing body, in this case one is an extremely poor
track record for dealing with information.
You think about, you know, this day or at the FCC, because their
jurisdiction allows them to deal with content on the broadcast network,
only. They can’t really enforce their views on the
cable network and on satellite.
But on broadcast they can. So you have literally the FCC trolling around,
looking for errant nipples and swear words.
And it’s kind of sort of really nanny behavior that not only hasn’t
been toned down, it’s actually, you know, the number of enforcements
and the number of the size of the penalties has actually gone up.
You know, this is an agency where it’s wearing it’s content manager hat
that has not given us reason to believe that they get what 21st century
life is really about. So my concern is about it as a principally,
the FCC, sort of any traditional physical government, but particularly
the FCC is an awful place not only to divine the rules but then
my concern is particularly around enforcement.
If somebody says, okay so let’s say the rules get passed, and under one
version of them any person in the world, any citizen of the United
States can file a complaint with the FCC if they think the rules are
being violated. The FCC must investigate within 180 days.
And let’s say that’s what goes into effect, so you can sort of imagine
the situation is, I’m at home, my cable seems really slow.
The Internet’s really slow today. I bet, you know, that Comcast is messing with
the traffic. And I’m going to file a complaint with the
FCC and they’re required to investigate it.
You know, and how are they going to investigate it?
Well, there’s very little — so they’ve been — there’s sort of a lot
written about it that’s from the lawyers standpoint. Sorry.
There’s very little that’s been written about it from the engineering
standpoint. What’s the engineering behind how the FCC
would investigate and enforce the rules assuming that they’re the ones charged
with that authority? Well, they’re going to have — it seems to
me that at least one likely way, and therefore the way that the FCC would
most prefer is that they’re going to have to have access to the
traffic. Not necessarily, you know, looking at all
the packets, but they’re going to have to say all right we’re going
to do a compliance check or we’re going to do and audit.
And we’re going to look at what packets were moving at the time this
complaint takes place. And we’re going to look to see if we see any
indication of non-neutral behavior.
Was it just the traffic was slow because the traffic was slow or was
the traffic was slow because the application I was using was Bit
Torrent or some other, you know, depreferred application.
Well, the only way they’re really going to be able to determine that is
to look at least some of the traffic, put it back together, and the
minute the FCC is doing deep packet inspection is the minute that I
would expect the Civil Libertarians to get the most upset.
Because of course, they’re looking at it for one purpose which is to
see if the wrong kind of stuff is being favored or disfavored.
But you know, this is the Federal Government. Now I’m not as paranoid as many of these groups
are, but you’d think that the more paranoid ones would be saying
that the minute that the FCC starts doing deep packet inspection what
they’re going look for other interesting things they find and of
course the War on Terror, most of it done secretly.
They will turn over lots and lots of what they find as they look
inside — you know, this is a worst case scenario. I don’t necessarily think that makes it an
unlikely scenario and I worry about that tremendously.
So those sort of law of intended consequences with the rules and the
problems of enforcement are why I’m strongly opposed to the FCC having
the authority to make sure net neutrality —
Net neutrality is fine. The FCC in charge of not so fine.
Yeah? We’re done right.
Time’s up.>>Well, I think we’re about all set but I
wanted to thank you again for coming to speak with us today.
Outstanding presentation. Thank you. LARRY DOWNES: Thank you.
My pleasure.

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