Customer Reviews

The Laws of Disruption: Harnessing the New Forces that Govern Life and Business in the Digital Age

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"The Laws of Disruption" is the closest thing you will find to a genuine cyber-libertarian manifesto these days. But Downes isn't a rigid ideologue; his skepticism of government regulation of the high-tech economy is based more on practical considerations and the fundamental law of disruption: "technology changes exponentially, but social, economic, and legal systems change incrementally." Downes says this law is "a simple but unavoidable principle of modern life" and that it will have profound implications for the way businesses, government, and culture evolve going forward. "As the gap between the old world and the new gets wider," he argues, "conflicts between social, economic, political, and legal systems" will intensify and "nothing can stop the chaos that will follow." In this sense, "The Laws of Disruption" reads like an addendum to one of Alvin Toffler's old books on technology and futurism in that Downes is essentially walking us through the practical consequences of life in a "post-industrial society."

In terms of what it all means for public policy, Downes doesn't so much fear legal and regulatory over-reach the way many cyber-libertarians do. Rather, he thinks most regulatory schemes just won't work. In essence, he is a technological fatalist or consequentialist: Progress happens whether we like it or not, so get used to it! Thus, the "laws of disruption" he articulates serve primarily as "Just-Don't-Bother" warnings to over-eager government meddlers. "The best way to regulate innovation is to leave it alone," he counsels.

In terms of structure, The Laws of Disruption resembles "Blown to Bits: Your Life, Liberty, and Happiness After the Digital Explosion" by Abelson, Ledeen, and Lewis. Both books survey a vast swath of territory -- privacy, copyright, security, etc -- and each chapter offers unique perspectives on each debate. In that sense, the book is useful to readers if for no other reason than you get a taste for how a wide variety of issues are playing out. Downes also owes much to Clayton M. Christensen and his seminal 1997 book "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail." Like that book, "The Laws of Disruption" is a business book with a strong policy hook. That is, both books focus on advice-dishing for companies and innovators looking to "stay ahead of the curve" in the midst of relentless, gut-wrenching technological change, but the books also include important lessons regarding the public policies that should govern high-tech sectors.

I highly recommended "The Laws of Disruption" and named it the 2nd most important Internet policy book of 2009 over at the Technology Liberation Front blog.

Larry Downes is the co-author with Chunka Mui of Unleashing the Killer App: Digital Strategies for Market Dominance 2000), in which they provide a brilliant analysis of how "a new good or service that establishes an entirely new category [can] by being first, dominate it, returning several hundred percent on the initial investment." As they explain, the primary forces at work in spawning today's "killer apps" are both technological and economic in nature. "The technology we are concerned with is the transformation of information into digital form, where it can be manipulated by computers and transmitted by networks." Digital strategies are needed to achieve market dominance. They suggest several, each worthy of careful consideration. For me, this book has two great values: It helps us to understand what a "killer app" is and can accomplish; also, for those lacking a "killer app" and without much chance of possessing one, it suggests how to increase and enhance the appeal of what one does have, such as it is. Given a choice, of course, anyone would prefer to have a "killer app" when proceeding into an uncertain future. Lacking one, there are still opportunities to recognize...and to pursue. Most companies will not dominate but can survive if committed to the appropriate strategies. For them and their leaders, this book could well be the difference between life and death.

In The Laws of Disruption, Downes asserts that there are three laws of digital life. Together, they comprise "the laws of disruption."

Moore's Law: In an article published in 1965, Gordon Moore (the founder of Intel) claimed that the number of transistors on his company's chips would double every year or two without increasing their cost to users. This law explains why computers continue to get faster, cheaper, and smaller.

Metcalfe's Law: Formulated by networking pioneer Robert Metcalfe, this law explains what anyone with a telephone already knows. The more people you reach, the more reasons you find to reach them. Standardization enables this process to accelerate at an ever-increasing rate.

The Law of Disruption: "As Moore's Law continues its relentless journey into the realm of smaller, cheaper, and faster, new applications arrive more quickly. As they do, Metcalfe's Law is there to spread them around."

According to the Law of Disruption, "technology changes exponentially, but social, economic, and legal systems change incrementally...In some sense, the Law of Disruption codifies what we have already learned from a thousand years of killer apps. Their initial impact can be dramatic - even revolutionary. But the real change may come years later."

Together with Moore's Law and Metcalfe's Law, the Law of Disruption is systematically rewriting the aging corpus of industrial-era law. "The result will be a new code, better suited to life in the digital age. In the midst of revolutionary change that is both fascinating and frightening, it's hard to look away. Confronted with the weird economics of information, the core principles of public law, private law, and in formation law are being turned upside down."

What to do? Downes proposes nine principles - the laws of disruption - that form the foundation for a new legal system. "One way or another, these principles will prevail. Open always wins. Whether the transition is relatively slow or fast, straight or zigzagged, peaceful or violent depends on all of us. Policymakers, business leaders, consumers, and citizens all have a critical role to play in the legal revolution."

With all due respect to Unleashing the Killer App, there are several reasons why I think this book is a greater achievement. Here are three. First, there are more and more valuable insights as well as an abundance of advice on how to take appropriate action on each. I presume to characterize this process as "killer execution." Also, Downes creates a frame-of-reference, indeed a multi-dimensional context for each of his core concepts that include but are not limited to the aforementioned nine principles. This helps the reader to understand the "why" as well as the "what" and "how" of "harnessing the new forces that govern life and business in the digital age." Finally, demonstrating the skills of a world-class anthropologist, Downes anchors his core concepts within human experience, suggesting the implications and consequences of myopia as well as the opportunities and benefits of what Joseph Schumpeter once characterized as "creative destruction." Downes is a dreamer, a visionary but also a relentless empiricist -- driven by insatiable curiosity -- and a diehard pragmatist -- almost wholly preoccupied with understanding what works, what doesn't, and why.

This is a brilliant achievement.

Business strategist Larry Downes, author of Unleashing the Killer App, is much more specific than most authors about how digital technologies are changing the world - and why technology will advance even more and have more impact. While he addresses numerous issues that have received lots of attention already, Downes also looks beyond the headlines and the obvious implications of digital technology to examine the root causes of change. He pays informed attention to the law and legal structures. He also draws parallels between the digital revolution and the social changes wrought by other technologies, showing how such change ripples through the economy. He presents his findings as nine "laws of disruption," which, somewhat confusingly, are the change agents of the "Law of Disruption." This forward-looking book is fun, lively and useful. getAbstract recommends it to executives who are trying to plan for a shifting future and to those intrigued by digital technologies or social structures.

The Laws of Disruption is a fairly short book - only 280 pages of actual text. One would think that it would be a quick read, maybe a long coast-to-coast plane ride. That was my thought as I skimmed the introduction and made the decision to purchase it. Once I started reading I quickly realized, that at least for me, this was not going to be a "skim for the high points" read that I quite often do with many business and technology books. Mr. Downes piqued my interest with his very first example of how changes in technology (in his case, the stirrup) dramatically outpaced and drove changes into the economic and legal systems in place at the time (the birth of feudalism, landed nobles and serfdom in this case). From the first example forward, I was hooked, waiting for the next example of disruption. I wasn't disappointed. Mr. Downes provides a wealth of real-world examples, all of which we recognize, but may not have understood or given much thought to at the time - BetaMax versus VHS for example.

The premise of Mr. Downes' book is fairly simple - technology, especially in the digital age, quickly and far out paces our antiquated economic systems' ability to support the "disruption" that results when the new technology (or social norm) takes hold and quickly spreads. To form the basis of his arguments, Mr. Downes uses three key concepts: Moore's Law, Metcalfe's Law, and the notion of "rivalrous" goods (those that can be possessed by only one person at a time and whose use is limited to that person or with whomever she may share it) and "non-rivalrous" goods (those that can be used by everyone at the same time - which results in limiting access to them to be difficult if not impossible). Obviously, Mr. Downes puts digital information into the latter category. To round out the equation Mr. Downes adds the concept "transaction costs", which in the digital age are quickly approaching zero. When you apply all the above factors (along with the principles of Renewability, Universality, Magnetism, Lack of Friction and Vulnerability as they relate to information) to any new technology or social norm in the digital age it is easy to see that our current economic and legal systems simply begin to crumble under the pressure exerted by the masses of consumers who are quickly gobbling up these new offerings. The key point that Mr. Downes makes in his book is that the majority of consumers essentially ignore and no longer respect the concepts of privacy and ownership. Thus, the systems we have in place which were built upon those principles no longer work to govern life in the digital age.

The Laws of Disruption centers around nine key laws - Convergence, Personal Information, Human Rights, Infrastructure, Business, Crime, Copyright, Patent and Software. I won't go into detail on each of these other than to say that Mr. Downes does an excellent job of laying a firm groundwork for each of these "laws", explaining how they relate to the digital age and giving, as I said before, lots of good examples of how digital age disruptions have tested and often overpowered our legal and judicial systems. I really liked how Mr. Downes demonstrated how various laws, acts and policies relate to each area and how the various government agencies play a role in trying to regulate life in the digital age. The recurring theme that resurfaces in each section is that our current laws and systems are inadequate and our legislative and judicial systems are not equipped to create new laws that effectively govern the new age. The result is that the laws that are enacted end up severely limiting or diminishing the value of life in the digital age - and that in the end, the people will write their own laws (which according to Mr. Downes will be much more effective).

For me the key take-away from the book is that most corporations are ill-equipped to deal with life in the digital age. As Mr. Downes points out, we hire lots of high-priced lawyers to craft mind-numbingly complex license agreements and terms of service, which ultimately only end up protecting us at the "very edges". So why waste the time, effort and money in the first place? A radical new shift is required which calls for the inclusion of the community of players in the digital world to come together and write a new set of laws that work for everybody. As Mr. Downes points out several times in his book, "open is good, closed is bad". My recommendation is that this book should be required reading for all managers in your corporation who have the power or authority to make decisions or commit resources which place your company at risk in the digital age.

Ultimately it's your choice to agree or disagree with Mr. Downes' position that government should get out of the way and let the global community define the laws of the digital age. But one thing you can't argue with is that without significant change in our antiquated systems, we are headed for a wild ride in the digital age. Pick up his book and give it a read - it will be well worth your time.

Downes provides a number of insights on the disruptions to law and regulation due
to the mismatch between the rapid pace of technical change and the (relatively)
glacial progress of the legal system.

The book considers nine "laws" of the information revolution, and discusses details
of how these phenomena relate to existing and emerging laws. Several highly relevant
areas include the handling of personal information; regulation of IT/ Internet/ communications
providers; internet crime; and patent/copyright law.

I believe that Downes gives well-reasoned comments and perspectives on these areas. In most of
the chapters, he offers predictions or recommendations; in others, the conflicts and
concerns are discussed with no clear path for resolution. To be sure, the problems are
large!

In general I think Downes' work is well thought through and presented at a level that
is accessible to the non-lawyer. This would be a critical title for those in IT
businesses, including those traditional businesses heavily influenced by IT
(such as financial institutions).

One bit of irony - in the chapter on copyright, Downes states "Intellectual property is a
fiction, if not an oxymoron" (p. 217). He argues for considerable expansion of "fair use"
and other relaxations, if not elimination, of copyright protection. Nonetheless he
copyrighted the book itself, rather than offering it into the public domain!

"The Law of Disruption," writes Larry Downes, "is a simple but unavoidable principle of modern life: technology changes exponentially, but social, economic, and legal systems change incrementally."

Downes focuses on one particular area of the legal system that modern technology is disrupting--copyright. This is an area near and dear to The Sizemore Investment Letter. After all, we publish a paid newsletter subject to copyright protections. The same is true for our books.

We face the same basic tradeoff that all media and software providers face: do we want the broadest dissemination possible -- in which case our works are more vulnerable to piracy -- or do we clamp down with a strong defense of our copyrights, limiting our reach in the process? There is no easy answer here. "As the new world runs increasingly ahead of the old," Downes begins, "social systems invariably break down, only to be dramatically reinvented to better suit the new environment to which human beings have already relocated."

Copyright protections certainly do appear to be "breaking down" in Mr. Downes's words. Fully 72 percent of Americans between ages 18 and 29 do not care whether the music they download is copyrighted or not. This is a demographic problem that has no solution. And while there have been high-profile cases of music downloaders being sued and criminally prosecuted, the likelihood of being caught is still practically nil, giving very little incentive to change behavior.

Furthermore, this is a sensitive area in which the interested parties need to tread carefully. Some readers may remember the backlash that the rock band Metallica faced when they supported measures to sue and criminally prosecute illegal downloaders. The band's popularity never fully recovered from that move. "Metallica is attacking their own fans!" was common cry among those affected. To an extent, this was a generational issue. The members of Metallica are in their 40s, about a decade too old to "understand" the mentality of music downloaders. To Metallica, file sharing was theft. To the fans, it was a way of supporting one of their favorite bands. The law is on the side of Metallica. But Mr. Downes raises the question, "should it be?"

Let us now take a look at the "causes" of internet piracy. Downes recounts the history of how copyrights came to be:

"In 1710, [the British] Parliament enacted 'An Act for Encouragement of Learning, by Vesting the Copies of Printed Books in the Authors or Purchasers of Such Copies, during the Times therein Mentioned.' The Statute of Anne, as it is known, turned what had been a monopoly by the Royal Stationer upside down. It gave the rights to authors, not printers, and limited the times for which those rights existed. It introduced the radical idea that a copyright was not simply the codification of some natural right the authors had as creators. Rather, it was a gift from the government given for the specific purpose of encouraging the spread of information. The grant, in other words, was given only to the extent necessary to meet an explicit economic goal--the encouragement of learning."

Stop and think about that for a minute. The founding documents of the United States (the Declaration of Independence, Constitution, Bill of Rights, etc.) state a belief that certain rights are "natural rights" given to mankind by God. Interestingly, monopoly power over one's literary and artistic works was not included in this list of natural rights. In the Anglo-Saxon legal tradition, this right was a gift from the government in the interests of performing a public good: encouraging the proliferation of learning, specifically that of "Science and useful Arts." (Based on this criteria, does most of today's copyrighted material deserve its copyright? Does a Britney Spears video or the latest episode of American Idol really constitute a "useful art"?).

Downes writes that the British-based copyright system worked well throughout the 19th and 20th Centuries. "The arts and sciences flourished, and piracy was minimal. The principal safeguard, however, was the market, not the law."

Buying a printing press to illegally copy a book was cost prohibitive, as was buying a disc stamper to make illegal copies of records. So was the storage and transportation, for that matter.

Of course, today the digitalization of media and the ease of file sharing have broken down these barriers, and detection and prosecution is expensive and difficult.

It is interesting that just as copyrights were getting harder to defend, their protections have been massively expanding. The number of years a work remains under copyright has grown considerably in recent years. Downes reports that copyright terms have been extended eleven times in the past fifty years. In 1962, copyright lasted fifty-six years. Today, it spans the lifetime of the author plus an additional seventy years. By the time most works become part of the public domain, they will already be forgotten. How many works of literature (fiction or nonfiction), art, or music have any demand at all 70 years after the creator's death? One percent? One tenth of one percent? The end result is that, for all intents and purposes, copyrights have become perpetual. Because by the time they finally do expire, the works in question have long since become obsolete.

This goes against the original purpose of copyrights -- to increase the amount of learning available to the public. Authors were to be given a limited monopoly on the commercial use of their work for a period of time sufficient to compensate them for the efforts. But does it make sense that Ernest Hemingway's novels are still under copyright forty-eight years after his death? (This is a major irritant to me because he's my favorite author and I don't want to re-buy all of his works to run on my Amazon Kindle, but I digress...). By the time a work of fiction is old enough to be included in a high school literature class, shouldn't it be part of the public domain?

At any rate, Mr. Downes has made several recommendations for "fixing" the copyright system to be more in line with the realities of the information age: setting realistic time limits, restoring the concept of fair use, and undoing the damage caused by the Digital Millennium Copyright Act of 2000.

We've already discussed the issue of realistic time limits, but we'll through in a few additional thoughts. The first would be that the term should vary with the nature of the work in question. For example, should a newspaper article, which relates information that is intended to be read and discarded within a day, be entitled to multiple decades of copyright protection? Or might a few days or weeks be sufficient? Books, which involve considerably more labor and which are less time sensitive, should be given a longer copyright. But how long? Ten years? How long is long enough to compensate an author for his or her time? This is hard to say. But to go back to Hemingway, does it make sense that his grandchildren are benefitting from works he authored in the 1920s? Should Michelangelo's descendants be entitles to royalties for reproductions of works he created in the 1500s?

Finally, if we use the original purpose of copyrights -- as a means to spread learning to the public--should pop music be given copyright protection at all? Not to pick on poor Britney Spears again, but can her work legitimately be said to be for the benefit of all mankind? Does it make sense to use the US court system -- and taxpayer money -- to give protections to something of such dubious societal value? And does it make sense to pay a royalty every time you sing "Happy Birthday" at your kid's birthday party? (It's a copyrighted song, so technically you're supposed to pay every time you "perform" it in public. This is why most restaurants have a cheesy alternative birthday song that they use for patrons.) It's not for us to say, of course, but these are legitimate questions that should be asked.

This brings us to the issue of "fair use," a concept that has been watered down considerably in recent years. I am able to quote bits and pieces of Downes's work in this article based on fair use doctrine, and he would no doubt applaud my decision to do so. It's good publicity for him, and he'll likely get a few book sales out of it. But my right to do so has become murkier in recent years. In many cases, even short block quotes have been found to be copyright violations. This is unfortunate because it slows the transfer of information.

Conclusions

All in all, we recommend Larry Downes's The Laws of Disruption. His work is an interesting analysis of the new economy and the misplaced legal guidelines that govern it. He did tend to gloss over a few details, however, and leave a few questions unanswered. On the issue of music piracy, his somewhat muddled answer seems to be to abandon the idea of getting paid for music altogether. Musicians can make money the old fashioned way: by playing live. Similarly, his answer for publishers like ourselves is somewhat unclear, but seems to be something to the effect of "allow for more `fair use' of your materials." Not surprisingly, Mr. Downes is also an advocate of open-sourced software solutions and the idea of software as a "service" as opposed to a "good."

At any rate, Disruption is a good read and raises several excellent points. Consider sending a copy to your congressman!