“Bernard of Chartres used to say that we are like dwarfs on the shoulders of giants, so that we can see more than they, and things at a greater distance, not by virtue of any sharpness of sight on our part, or any physical distinction, but because we are carried high and raised up by their giant size.” — John of Salisbury

A few things are going wrong in Second Life for quite a while. Mostly, it’s framed as a debate around copyright. But the more I think about it, its actually an explosive demand for money. This is my first installment of the series, and following this posting is “The Lava Tubes of the LindeX”, and “How to Build High Pressure L$ Pipes”.

This posting concerns the demand for L$, which is exacerbating the content counterfeiting situation in Second Life. “The Lava Tubes of the LindeX” concerns the actual nature of our monetary system and how its causing the economy to falter. “How to Build High Pressure L$ Pipes” concerns what Linden Lab could do to fix it.

Content creators say they are being stolen from. And they are right.

There is a vocal group of people in Second Life, who, for purely selfish reasons, shout them down screaming that there is no theft taking place. Well, let’s examine the basis of this economic position. Wages are the product of your labor. When you make an item to sell in Second Life, this is your wages. I cite Adam Smith.

The produce of labour constitutes the natural recompense or wages of labour.

When you make something in Second Life, this is your wages.

When demand for your wages is driven down by someone counterfeiting your products, this is a form of theft from any reasonable economic view. As we are mainly still in the “natural state of things” in Second Life, most people in Second Life are not paid in wages from L$. The L$ is not actually a good store of value, and therefore it is not used for this. People in SL who earn money from wages more generally earn them through US dollars directly or by exchanging their L$ to dollars.

Content creators earn money when they sell items they have made in Second Life. The content they create is their wages. END.

So what about this argument: “immaterial property” can’t be stolen?

Let’s destroy this fallacy forever. Actually, there is no immaterial property involved in duplication of digital content. Everything in Second Life is bits of data that resides upon a network on real life physical hard disks and transferred across physical communications networks to and from your very physically existing computer. The only thing that has changed: reproduction is insanely cheap to duplicate digital goods.

The costs of creating the data in the first place have not significantly reduced.

This is no less important than another Industrial Revolution, and I am talking about counterfeiting when creating unauthorised copies of products and then transferring it to others for sale or for free.

That being said, I do not support draconian copyright laws whatsoever and support shortening the term, plus broadening fair use rights. Art needs to be displayed so we can enjoy it after all, and this constitutes the basis for an expansion of fair use from a consumer rights perspective from my point of view. I simply support the right of artists to make a fair wage from their labor if that was their choice, in balance with consumer rights to use the content fairly, in the effort to see a more stable economy emerge

The only true “immaterial” property is something that cannot only be duplicated over and over on a hard drive or removable media, or transferred on a computer network. Rather it is something that can be invented and duplicated over and over in the wetware of your human brain as well. These are your ideas, and no computer has ever been shown to create original ideas, and I doubt they will be able to do it in the next 100 years, or the next 100,000,000. Never, in fact. Sorry to all the Transhumanists out there waiting for the Rapture on the backs of hard working content creators, I think you’re all a bit goofy. Better off going to church, for all the good that will do you.

I believe its better to keep making infinite copies of good ideas and spreading them to others! May Plato’s world smile, for we are all still in the cave watching patterns of shadow dance on the walls without quite understanding what they mean, or even what they are. This is life in physical reality. The shortcut to computer heaven simply can’t help anyone to reach understanding of Plato’s world. Besides, some cheeky bastard will just wait till you’re all uploaded, then turn the power off.

And heaven help you if you’re uploaded in San Francisco and the Big Earthquake finally arrives!

Back to seriousness.

Copyright relating to a particular expression of an idea is an obvious way to provide a limited benefit to someone using good ideas in digital form, as the product can be reproduced cheaply. Call it symmetry. Patent seems like a mirror image of copyright to me. That bastard Trademark is just survival of the fittest though.

I believe good ideas are prevented from spreading by setting up a monopoly on these ideas and filing a patent, preventing people from innovating and producing a new expression or improvement on that idea. Others may disagree and I am not expressing a legal opinion (I am not a lawyer). I do see the need for some patent protection, but only in extraordinary cases involving expensive manufacturing, and I support the idea to shorten the length of term generally.

So when someone takes things in Second Life and resells or gives them away, what happens?

They have taken the wages of another, as Adam Smith long ago explained. The time to create, physical work, skill, and good ideas involved to create the item all not yet compensated for. All these things are scarce goods. It has taken a possible sale from either the original content creator, or worse, from other content creators who sell legitimate competing products that were perhaps more desirable or originally cheaper. But now, these are not getting sold either, as the best quality items are getting resold by multiple outlets at similar or lower price points. A race to the bottom has started.

It is true that the top tier merchants may actually dominate the market in the long run when customers realise where to go to legitimately acquire items that they have mistakenly bought from a ripper, or received for free. However, this is at the expense of other content creators who have made original midrange and low priced products. So a self reinforcing pattern occurs, that allows top tier merchants to stay at the top making the most income, and more people are actually not making a great deal of money for their work anymore.

This seems to help explain one part of the “war on freebies” phenomenon. While I am completely in support of people making and giving away items as their free choice, it is no longer a free choice when the market is flooded with low priced and free items that were supposed to be expensive to buy and cost a great deal to produce. The price no longer accurately signals the cost of the item.

A monoculture of cheaply farmed trees has taken over what once had been a complex and varied market forest at the flanks of our LindeX mountain. And this sets up a fragile market condition for producers and products for sale.

Less people who produce items for sale, and fewer unique items available for sale. The “Long Tail” has emerged, a power law has taken over what might have been a more stable “bell curve” of producers and unique products for sale. I maintain this is a fragile market, far more prone to wild swings of consumer demand. With fewer sellers, the market changes to one of a few producers who cash out most of their earnings to dollars, not spending inworld. Those who had a less popular store, make less money and must buy more L$ to pay their land tiers.

More people have to buy L$ in order to buy products, and there are fewer unique items for them to buy now. The quirks of consumer behavior are more freely able to influence the market in all its very human wild ways. People will rush to buy all the same item in one fad, spreading like an epidemic, leading to that item getting copied over and over by counterfeiters in a rush to earn some easy L$ while the fad rides high. Then, the fad dies off and nobody wants to be seen dead in that anymore… the designer now out of fashion.

Once consumer demand falls off, and it always does in fads, so will buying L$ for that product, perhaps even a LindeX lull if the fad was large and fell off sharply. Talented creators who benefit from the fad do better,despite the thieving and the oscillations of these consumer ups and downs. Talented creators who didn’t produce something in the fad fashion, get pushed out further than they might have ordinarily from lack of sales. Either they make similar products to the fad, or they stop producing.

The flood of similar products and lack of ecological diversity in the economy sets up a monoculture waiting for the disaster to happen. A vicious cycle of hunting ripper stores and filing DMCA’s to the roof, with no end in sight. Even the “beneficiaries” of this “unauthorised copying” aka counterfeiting, don’t make enough money to spend all the time it takes to file DMCA’s as it takes away time from producing new items. The DMCA is seriously flawed, as small creators generally can’t afford to drag all these people to court. We must seek  a long term solution to our problems, not using the legal system.

Time and ideas are the scarcest resources of all.

When no longer worth the time involved to produce new ideas that go into products, it is near certain that production should slow as well as demand. Many creators stop producing. Closing up shop, less shops getting rented, less tier paid to LL, less rent paid to middlemen landlords, who then close sims. And with a drop in both production and demand, goes a drop in valuable information in the society. Eventually a drop in the volume buying of Linden dollars can be expected. Especially when the next fad for a virtual world takes place and Second Life is not quite as cool as it once was, in the wake of emerging competition with the ideas of others in new virtual worlds.