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Today’s Note: Yet Another Take on SOPA…West of the Pecos

January 20, 2012

Several recent Notes have discussed the SOPA/PIPA legislation currently under consideration in Congress. Today’s Note is another take on this topic, this one courtesy of the excellent blog posts at Harvard Business Review (HBR.com). The original post was published on January 18th, the day many web sites went “dark” to protest SOPA/PIPA.  The authors are James Allworth and Maxwell Wessel, who both are associated with Harvard Business School through a think tank, there. If this post is any indication, they are both worth following and can be found on twitter (on Twitter at @jamesallworth and @maxwellelliot).

Their post, “The Real SOPA Battle: Innovators vs. Goliath,” paints their picture of what SOPA and PIPA are really about, and it’s not the story you’re getting from the rest of the media. While most people are evaluating Intellectual Property (or “content”), or revenue aspects of the story, Allworth and Wessel are just talking business. And they do it well, making a point worth your time to read.

Early in their post, Allworth and Wessel stake our their unique territory by turning the story one hundred eighty degrees around and looking at it from the other side. They say “the purpose of this article isn’t to explain what SOPA and PIPA will do. Instead, it’s about explaining what’s brought them about: SOPA and PIPA are prime examples of big companies trying to do everything they can to stop new competitors from innovating. They’re also examples of how lobbying in the United States has become one of the most effective ways of limiting this sort of competition.”  [ Italics are, in all cases, added by me and denote quotes from the post. I have not, however, preserved the hyperlinks in the article.]

The authors argue that the essence of this proposed legislation is not that content needs protection, but that the status quo needs protection. From who? From smaller, leaner, hungrier and more agile companies who are prepared to deploy disruptive technologies into the marketplace. But wait a minute, we ask? Don’t we want that? Sure we do. But entrenched businesses with established revenue generating products don’t want to see those revenue streams compromised in a major market shake up. The authors sum it up this way:

So if “content” vs “technology” doesn’t capture what’s going on in this fight, what does? Well, SOPA makes much more sense if you look at the debate as big companies unwilling to accept change versus the innovative companies and startups that embrace change. And if we accept that startups are created to find new ways to create value for consumers, the debate is actually between the financial interests of “big content” shareholders versus consumer interests at large.

Allworth and Wessel go on to flesh out the business landscape in clear strokes:

If you take a look at many of the largest backers of SOPA or PIPA — the Business of Software Alliance, Comcast, Electronic Arts, Ford, L’Oreal, Scholastic, Sony, Disney — you’ll see that they represent a wide range of businesses. Some are technology companies, some are content companies, some are historic innovators, and some are not. But one characteristic is the same across all of SOPA’s supporters — they all have an interest in preserving the status quo. If there is meaningful innovation by startups in content creation and delivery, the supporters of SOPA and PIPA are poised to lose.

Even for those SOPA supporters that are historic innovators, their organizations focus on improving products in the pursuit of profit. They innovate to increase prices and limit production cost. Even when new models and technologies give rise to huge businesses, these incumbent firms reject meaningful innovation.

This is a convincing argument. In case you were tempted to dismiss it, the authors provide a pointed example: “For example, Viacom has been locked in a legal fight with YouTube — so far, unsuccessfully. If SOPA were to become law, however, Viacom would be able to entirely shut down YouTube’s revenue stream while the case was in court. Balance tipped.”  [ in this case, both bold and italics are added by me, for emphasis] This is pretty big stuff. It sounds like the old west, where the biggest gun won. And we’re really getting west of the Pecos*, here.    Good capitalists in the United States have always learned that new, innovative companies are the lifeblood of a free market economy. I’ve even read articles that suggested that the growth resulting from unbridled innovation was the reason Marx’s vision of class revolution never materialized, having been snuffed out by greater economic efficiency than he could have conceived. Whether that’s true or not, we Americans certainly hold “building a better mousetrap” nearer our economic hearts than competition-stifling laws.

The authors, gaining steam toward the end of their post, wrap up with this energetic lunge at legislators:

SOPA is a legislative attempt by big companies with vested interests to protect their downside. And unfortunately, these companies have conscripted Congress to help them. What’s worse is that even though limiting start-up innovation might help big content in the short run, it’s not going to do them in favors in the long run. Nor is going to do America any favors. In the midst of one of the worst recessions in living memory, passage of legislation like this is just going to result in innovators moving to geographies where the regulatory environment is more favorable. Start-ups will be less competitive in the United States and we’ll have effectively disabled one of the few remaining growth engines of the economy.  [Bold emphasis preserved from the post, while I’ve added italics to be consistent with prior quotes.]

Touche. This is, hands down, the best SOPA/PIPA piece I’ve read. Whatever you think of SOPA/PIPA, read this article before you finalize your feelings on the subject.

* The “West of the Pecos” line refers to a 19th Century frontier saying: “There’s no law west of Dodge, and no God west of the Pecos.”

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4 Comments
  1. Thank you for sharing this piece. I haven’t read the actual documents in full yet to be best aware, but I have greatly enjoyed others takes on the subject this past week.

  2. TaxCoach permalink

    Thanks for the update. I’d like to see what could happen next week.

  3. Great article John. I thinks what’s played out in the last few days is going to slow down the pencil whipping legislators somewhat. Of course there has to be a means to track down and prosecute real pirates, just like in a non-virtual conflict. But to give that ultimate power up to software that could integrate into a data base and block sites at will is, well sorta communist.

    thanks
    stu

  4. mandyf permalink

    What a very solid comprehensive post! It helped clear a few points up for me. Well done!

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