Hey folks, back from the Middle East-NN
-----Original Message----- From: Brad De Long <delong at econ.Berkeley.EDU>
>Yeah. But where are the profits going to come from? Profits from R&D
>arise only if the R&D allows you to set up some very strong barriers
>to entry behind which you can shelter. And I can't figure out what
>those are going to be...
There is another perspective on the whole insane Internet stock pricing issue which looks not at profits to revenue (which is a traditional way of understanding how much of a return on investment a company is making) but to understand that in the information economy, precisely because goods are naturally "non-rival" (i.e. could be used by anyone), the key to profits are who can corral social resources and either copyright or patent them, or in a somewhat Henry George analysis, plant themselves on valuable "real estate" in the linked social space of cyberspace.
In this sense, analyzing the information economy does not supplant Marxist analysis of exploitation, but in fact expands it. Capitalists make superprofits by not only exploiting the work and ideas of their own workers but of those of the public sphere, of other companies workers whose companies were not skilled enough to package their intellectual property correctly for state legal sponsorship or from customers themselves.
Yahoo is a good example. Its whole value is based on its position as a key piece of real estate where you can reach so many other places from it. And how did it get that way? Because it started as part of the "public space" of the early Internet when various people did the work themselves of telling Yahoo where they were. A lot of unpaid social labor went into creating the whole Yahoo system of categorized information. Because of that, it is extremely hard for any competitor to fully replicate and compete with Yahoo unless they can induce a similar free expenditure of social labor on their behalf. Otherwise, the costs of doing the same categorization through paid labor would be prohibitive.
Similarly, Wal-Mart and now Amazon.com are developing whole business models based on consumers voluntarily handing over massive amounts of information on their buying habits. This is an unpaid transfer of knowledge to the companies from consumers, which the stock market may be effectively measuring, where traditional revenue-profit measures would not.
Within the workplace, we see a whole range of debates on "teams" where the key issue is whether companies will be able to permanently claim any idea produced by their workers - legally assert a trade secret and thereby bar an employee from sharing that idea (i.e. skill) with any future employer. To the extent that basic skills move from the domain of non-rival shared ownership among skilled workers to the private property of individual companies, that is a massive value for corporations that is poorly measured by any traditional bookkeeping methods.
The role of the government in all of this is what makes this new information economy form of exploitation a bit different. It's not that the state wasn't there backing up Henry Ford with riot police, but this kind of repression is more intimate and pervasive, reaching into the mind to declare this idea yours to share with anyone while this one the property of an employer and best forgotten if you ever leave that employer.
There is an opportunity for leftists in all of this as well, since the very dependence on state protection of their intellectual assets means that socialization of their assets require not active state intervention (traditional nationalization of heavy industry) but merely state withdrawal of IP rights. This vulnerability can be used to both build up new coalitions interested in publicly shared information goods, but also in a more strategic way to pressure companies in other spheres. The companies very dependence on IP laws may make them more willing to trade off support for better social welfare policies to keep those assets if they are strategically targetted.
On the global level, the dependence of multinationals on IP laws might be similarly used to fight over labor and environmental standards. THe global order is not (as its proponents argue) one of laissez-faire but of escalating government involvement in intellectual property around the world. That is not merely an ideological point but one of significant political reality, since despite rhetoric of the cyberlibertarians, no multinational really wants the core power of the state weakened in the new era. They need it too desperately.
--Nathan Newman