>-----Original Message-----
>From: Doug Henwood <dhenwood at panix.com>
> >But how much are we really talking about here? The culture industry
> >and software, for sure, but what else? Economically speaking, these
> >are rather small, though of course the culture industry's importance
> >is mainly nonmonetary.
>
>As far as "pure IP" industries, you can't forget pharmaceuticals as well,
>but IP actually pervades all industries, with patents and trade secrets a
>key part of the economic portfolios of companies ranging from oil
>companies to the car industry to the whole retail sector. As I noted, the
>key issue is not what is the value of IP as a percentage of revenues, but
>IP's value in determining profits.
I deliberately left out pharmaceuticals - not to mention other industries - because the issues are a lot more complex there. With drugs, chemicals, machinery, etc., IP is embedded in complex manufacturing processes. With software and movies, anyone with a cheap machine can duplicate materials almost costlessly. New Economy partisans make a big deal out of that as being assults on scarcity; when I interviewed Columbia U economist Graciela Chichilnisky, she was positively bubbling over with enthusiasm about how ownership doesn't matter anymore in an information economy. But Merck and Intel are still making pots of money. So's Microsoft, and it's theoretically the most vulnerable of all.
>Basic economics (in both capitalist and Marxist varieties) generally argue
>that profits should tend towards zero, and there is a lot of ink spilled
>explaining why companies create profits, especially profits above the cost
>of money. One explanation is the Schumpeterian argument of continual
>innovation and destruction, with profits deriving essentially from "first
>mover" getting market dividends. That no doubt has some truth, but does
>not quite jibe with the sense of more established industries- even if you
>argue for such Schumpeterian disruption in more localized aspects of the
>industry.
I have one word for you Nathan - exploitation!
>In the past, the heavy investment needed in machinery helped companies
>lock-in advantages that few rivals could match, or would match if their
>investments would be obliterated in competitive drops in prices. Even if
>a rival was making nice profits, it would make little sense to invest
>massive money to compete if the only result could conceivably be massive
>losses on both sides. This created what economists traditionally called
>the "quasi-rent" returns from many forms of industrial investment.
>
>The problem today with many forms of computerized machinery is that rivals
>often have similar machines that can be easily reconfigured to match any
>innovation, so such quasi-rents are often impossible. In a sense, the
>Internet is the newest, most pervasive example of such a reconfigurable
>machine used by many competitors. In a purely free market of ideas, this
>threatens profits to the core.
The Internet itself is a hard place to make money, for sure. But in these two paragraphs, you go from saying it's harder to earn quasi-rents (i.e., some kind of monopolist's profit above the "normal" rate) to saying the very notion of profit itself is under siege. We could speculate on how rents and profits could be under pressure in the near future, but it's hard to see from current profits reports. U.S. profitability levels are the best in decades, and even European profits are high enough that the BIS recently did a paper wondering why they were so high amidst stagnation.
Branding strategies are one way to try to force up quasi-rents. Tom Frank has a wonderful piece in the July Harper's on that topic. I'm going to append an excerpt below - not necessarily because it's relevant, but because it's so good. I'll email the full text to anyone who wants it.
>(I should note that I think trade secret law is a bit of a holy grail in
>this analysis, since it involves the key axis of class conflict in the new
>information economy, and the value of its assets are no doubt far higher
>than all copyrighted and patented IP assets. It also sheds dramatic light
>on the whole debate over unions and teams, since trade secrets are exactly
>the kind of innovation - usually uncompensated to employees - that team
>innovation produces. This is where my current research is concentrated
>right now.)
Keep us posted. But this is pretty old territory for capital, isn't it? Wasn't F.W. Taylor trying to get the workers to part with their trade secrets a century ago?
>The point is that IP law becomes a critical tool for companies in
>maintaining their profits through control of the dissemination of
>innovation. In a certain sense, the nutso Internet stock prices reflect
>not just investments in companies in an industry seen as super-profitable,
>but a meta-bet on an industry seen as potentially key in shaping the
>control of dissemination of all innovation.
You're giving the plungers too much credit. Nutso net stocks are a bet on "tomorrow," whatever that means exactly.
> If dissemination of
>information is a key to profits, than control over the means of
>dissemination is a potential key to the highest profits of all.
Very big if there....
Doug
----
from "Brand You," by Thomas Frank [Harper's, July 1999]
But the work of empowerment-through-listening went on. There were other demographics to liberate, and Laybourne told the Planners how she and her new organization, Oxygen Media, were preparing to launch a new "entertainment brand" for women, a segment of the population that sounded just as lovable in Laybourne's tellingas misunderstood, as monolithic, and as desperate for accurate media representation-as the kids themselves. Al though the exact nature of the programming to which Laybourne's new brand was to be affixed remained mysterious throughout her talk, she did let drop that the ideal medium for it would be the Internet, which she described as a living embodiment of her notion of democracy through dialogue. Growing audibly indignant, Laybourne switched into protest mode, railing against the arrogance of those who
think that they can put a structure on this thing. But the Internet is an organism, and they are trying to put mechanisms on top of an organism. It won't work. It's too powerful. Once people taste freedom-this is the United States of America, we've got that in our blood. This is a revolution that will be led by kids . . . and I hope women as well.
No revolution is complete without reactionaries, real or imagined, and so Laybourne let us know where she and her new brand drew the line, stopped listening, and started excluding - namely at Southern Baptism, which had recently made the subjection of women an official element of its credo. "I don't think that our brand is going to appeal to those Southern Baptist men," she remarked tartly. The ad execs erupted in laughter and applause.
But in the revolution against institutional hierarchy that continues to embroil the republic of business, Laybourne was a moderate and slow-moving Girondin compared with the Jacobins of the British St. Luke's agency, which had dispatched Planner Phil Teer to inspire his American comrades with tales of upheaval and progress at "the agency of the future." St. Luke's was nothing less than a syndicalist agency, its ownership shared uniformly by each employee. Teer was said to have come to advertising only after working as a critic of the tobacco industry, which bestowed upon him a credibility that not even Laybourne's focus-group epiphanies could match. His irreverent, self-effacing way of talking won the instant enthusiasm of the audience. He showed us slides that contained the word "fuckin'." He spoke in a working-class Scottish accent, which, he acknowledged, made him difficult for Americans to understand but which also demonstrated the progress of the revolution: "It used to be, a year ago, we always sent nice, middle-class, Oxford-educated, public school boys to talk at conferences for St. Luke's." Surely this was the real thing at last.
Teer did not disappoint. He passed the next hour alternately extolling the artistic idealism that burned at his agency and tersely proclaiming the slogans of the business revolution. "If we stop exploring, we'll die," he said. "Work is leisure," read one of his slides. "Transform people," insisted another, flashing on the screen while Teer told of the liberation of the admen: the story of the security guard who now "dances to jazz funk as he does his rounds," the former suit-wearing executive who is now "a shaven-headed DJ." Not only had St. Luke's freed its employees to participate in the subculture of their choice but it had also invented such boons to productivity as "hot desking," a system in which people worked wherever they wanted in the company's unstructured office. "Abolish private space, and you abolish ego," Teer proclaimed. Even agency performance reviews had been revolutionized (the chairman was reviewed by a receptionist), apparently along the lines of the criticism/self-criticism sessions once fashionable on the Maoist left. But the people of St. Luke's were less interested in smashing the state than in "killing cynicism."
Not surprisingly, the ads produced by syndicalist admen turned out to imagine the brands in question as the contested terrain of social conflict. For Ikea, St. Luke's had imagined a cultural revolution in which the women of England rise up against chintz, a symbol of the old order as loathsome as cold desks or middle-class public school boys. "Chuck out that chintz. Come on, do it today," ran the jingle, sung to acoustic guitar accompaniment. The Planners boisterously endorsed the call for People's War on chintz with waves of enthusiastic cheering.
After the Planners had talked enough chaos and revolution for one day, they descended on gleaming, polished escalators past the Palm steak restaurant, the elite pen shop, and the indoor waterfall, and were ferried by buses disguised as trolleys to the Massachusetts State House, where they were welcomed by a platoon of men dressed in Revolutionary War uniforms and ushered up to one of four or five open bars dispensing microbrews and Maker's Mark.
"Anyone can make an identical product," one adman told me as we relaxed in a gallery of patriotic artifacts from Boston's heroic period. "Why do we choose one over another?" I listened to assorted rumors about Red Spider, the mysterious Scottish Planning consultancy whose representatives had conducted an extremely exclusive all-day training session at the conference. I was told by one Planner that your company's check must clear the bank before Red Spider will even leave Scotland; by another, that Red Spider never distributes anything that has been written down; by a third, that their instruction is done in a mystical master-to-acolyte approach; by a fourth, that their instruction takes a simple fiction-writing-seminar approach; and by a fifth, that in fact Red Spider will distribute things that are written down, it's just that the guy who was supposed to bring the written materials got sick.
Many Planners are former graduate students from the social sciences, a woman from a Chicago-area agency told me. It's "Margaret Mead meets the Marlboro Man." A man in twotone glasses from one of the more creative New York agencies informed me that Planners are outsiders in a Peyton Place industry, both ethnically and institutionally.
"That's the mystique of the Swiss Army Knife," came an earnest voice from a nearby table. "Now, when you put that on a sweatshirt. . "