Reporting

Marx, Capitalism, and the Sharing Economy

Are AirBnB and Zipcar leading us into communism?

Or, less sensationalistically: Does the rise of the Sharing Economy represent the beginning of late capitalism’s final evolution into communism, as predicted and advocated by Karl Marx over a century ago?

To explore this issue, I had a great conversation with Mark S. Byrnes, Associate Professor of History at Wofford College; and William Carleton, startup lawyer, columnist, and blogger at Counselor @ Law, America’s #1 most popular Securities Law blog.

Our conversation also ranged over public utilities and monopolies, the rise of the railroads, The Circle and 1984, Theodore Roosevelt and the Progressive Era, 3-D printing, the Federal Reserve, the NSA, the Affordable Care Act, and the Surveillance-Social Network Complex. It was a lot of fun, I learned a lot, and the conversation changed my mind– which is always the best recommendation.

Evgeny Morozov recently wrote a critique in The New Yorker that compares today’s Maker movement to the Arts and Crafts movement of the early 20th century, and argues that it is likewise doomed if it continues ignoring the fight for justice, and fails to discuss institutional and political change. As an activist and former MAKE editor, I agree. Morozov’s essay reminds me of this conversation with Byrnes and Carleton, which focuses on different aspects of the same historical era, and comes to similar conclusions.

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MAKE: California Needs Investment Crowdfunding: An Open Letter to Gov. Jerry Brown

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Goli at MAKE asked me to write a column on crowdfunding for their vol. 38 print magazine, which comes out in March. I wanted to focus on the state exemption movement with an “Open Letter to Gov. Jerry Brown” petitioning for an intrastate exemption in California.

Goli and I realized that it would be better to publish something like that sooner on the MAKE blog, and then revise it to be more generalized, and not framed as a letter to Jerry Brown, for the magazine. So that’s the plan– and here’s the blog post, which just went up yesterday.

To make the editorial more “actionable,” I created a Change.org petition using the same text, and linked to it at the end. I generally think online petitions are a waste of time, but am hoping this will be an exception.

My co-conspirator on the effort is Mark Perlmutter. A few years ago he tried to interest some California state reps and other elected officials in a California crowdfunding exemption. He didn’t get any bites at the time, but the climate’s different now, so I think it’s going to happen.

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How the SEC Listened to the Crowd for Crowdfunding Rules

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[Originally published on PBS MediaShift]

Last month, the Securities and Exchange Commission published its long-awaited proposed rules for the most radical part of the JOBS Act of 2012. These rules set the terms for what’s called Regulation Crowdfunding, under which the general public will be allowed to invest limited amounts in small, unregistered securities. Regulation Crowdfunding represents one of the most momentous changes in U.S. federal securities laws since the Securities Act of 1933, which first established our legal framework for selling investments.

What’s remarkable is the way that the SEC wrote these rules. How much they draw from the crowd and how they’re framed represent another big change in how the SEC is open to working and that has implications for the future of the crowdfunding movement.

Read more at PBS MediaShift

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Online Platforms Give the First Public Look at Private Equity

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[Originally published on PBS MediaShift]

A major change in federal securities regulations takes effect this week, and many people are wondering how it will turn out. It’s now legal — with the proper filings and for the first time in over 80 years — for businesses to publicly advertise for investors. Proponents hope that this change will spur entrepreneurship, job creation and innovation nationwide, particularly in areas outside of the typical startup hotspot cities. Detractors fear that the regs will provide a new mechanism for fraudsters to scam retirees and others out of their wealth. Either way, the system known as “private equity” won’t always be so private anymore — and as of Monday morning, several online platforms discussed below are giving the public its first look at the formerly secret world of startup investing.

Read more at PBS MediaShift

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Your Guide to DIY Crowdfunding Tools (to Avoid Kickstarter Fees)

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[Originally published on PBS MediaShift]

Kickstarter pioneered a set of rules and an uncluttered visual grammar that has become the familiar frame for online fundraising, and many other such crowdfunding portals have since copied or adapted their formula — even sites that started earlier. Now, an explosion of cheap and easy new tools and services makes crowdfunding more democratic than ever, by empowering fundraisers to bypass portals like Kickstarter and IndieGoGo entirely.

Some of these tools enable people to create standalone campaigns on their own websites, where they don’t have to give up the 5 percent-or-so commission that commercial portals typically charge, and they also retain full control over the user experience and their relationship with the funders. In other words, the crowdfunding page will have your branding and domain, not the portal’s, and a portal won’t track and bug your funders for their own promotional purposes.

Other new tools and services empower people to “be their own Kickstarter” and create a multi-user portal of their own, where they can host other people’s crowdfunding campaigns and collect the commissions themselves, or choose not to. They can launch these crowdfunding portals from their own dedicated domain, or else as funding pages integrated within an already-existing web presence.

Read more at PBS MediaShift

Ron Popeil © Image: Housewares.org

Crowdfunding and Direct Selling: A Conversation With Dan Williams

Ron Popeil © Image: Housewares.org

Ron Popeil © Image: Housewares.org

[Originally published on crowdsourcing.org, 20 May 2013]

What would the new K-Tel “22 Original Hits” collection be for Crowdfunding? Chances are, it would include must-have (and top-funded) presale products like a fly-killing salt gun, a 3D doodling pen, a networked video doorbell, a robotic insect toy, spring-cushion shoes, migraine-relieving eyeglasses, a gourmet cooker that clips onto any pot, stickers that prevent you from losing things, and little clips that mean you’ll never have to tie your shoelaces again.

As a lifelong admirer of such clever things, I love how crowdfunding has unleashed a wave of ingenuity in consumer products. The immediacy of their appeal reminds me of some products advertised on TV, like the Robo Stir or Rollie EggMaster. As with crowdfunding, these Direct Response (DR) products are sold directly to consumers from the entities that make them. That’s why I consider online “pretail” crowdfunding, in which backers fund production runs of products as a way of hopefully buying them in advance, as a new, indie, riskier form of DR. The crowdfunding portals have discovered that campaigns fare much better if they include a video, but the DR people have known this all along.

Dan Williams serves on the board of directors and chairs the Internet and Emerging Media Council of the Electronic Retailing Association (ERA), the main trade organization for the DR industry. ERA member companies spend about 3 billion dollars per year on advertising, mostly television, including both spots (“short-form”) and infomercials (“long-form”). I recently spoke with Dan about crowdfunding and DR. Here’s part one of a three-part conversation:

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© Image: Wen Chuan Tan

Crowdfunding: Revenge of the Outsider Ants

© Image: Wen Chuan Tan

© Image: Wen Chuan Tan

[Originally published on crowdsourcing.org, 22 Jan 2013]

Imagine that you’re an ant who’s looking for food. One strategy is to find other ants who are crowded around a large source, like a dropped candy bar, and then attach yourself to their supply line. A second strategy is to strike out on your own and look for undiscovered sources of food: crumbs that you can carry yourself, larger pieces that you may need some help with, or a massive new find that will attract and support its own crowd of dedicated ants.

Like ants, humans also arrange themselves in groups to exploit resources together, and I often think about human organizations in terms of this ant analogy. The first strategy described above is the “insider” approach: identify the most promising crowd of ants, join it if there’s room, and if you’re feeling ambitious, work your way up closer to the food source. The second strategy is the “outsider” route: look for some food that no one knows about, or else try to figure out a new way of finding it. If you hit it big, many more ants will join you, and you will be in front.

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SEC Comment: Addition to Proposed Investor Qualification Exam

[Reprinted from Public Comments on SEC Regulatory Initiatives Under the JOBS Act: Title III — Crowdfunding, 2 Jan 2013]

Subject: SEC Regulatory Initiatives Under the JOBS Act: Title III — Crowdfunding

January 2, 2013

In my comment letter incorrectly dated July 26, 2010 (it should have read “July 26, 2012” – sorry!) I rough-drafted a suggested investor education and qualification exam for crowdfunding that includes 16 multiple-choice questions, each addressing a different possible red flag (or “Risk Factor”) for registration-exempt online investing. Here is another, 17th question that I neglected to include:

Impersonation

Online identities can be stolen or hacked by criminals, who then use them to impersonate friends, family, and other people you know. If you receive or see an online investment solicitation that lists people you know as offerers, investors, recommenders, or otherwise involved, understand that it may be a scam that has nothing to do with them. Telephone them or discuss in person before investing, so you can hear their voice and verify that they are not being impersonated. Don’t rely solely on online communication, since it may already be compromised. Be especially suspicious of online comments or conversations that somehow “ring false” — are attributed to people you know, but don’t seem like the way they normally communicate.

Choose the statement below that makes the most sense.

  • Wow, here’s an investment that my entire first-degree network highly recommends. And in this discussion, many of them call it a “great opportunity.” I’m in!
  • I haven’t heard from Brad in a while, but he just contacted me to invest in his can’t-fail new business. Hmm, this doesn’t seem relevant to his interests, and the wording here doesn’t even really sound like him– but hey– good for him, and I’m glad to know about this! Sure, I’ll invest!
  • This solicitation lists my friend Carol as an investor, but she never said anything about it when we had lunch last week, and it’s something she would have mentioned. I’ll call her up to check that it’s true, and if it isn’t, I’ll forward the solicitation to the SEC’s Crowdfunding Fraud email address and call their 24-Hour Crowdfunding Fraud Hotline to alert them.

Respecfully submitted,
Paul Spinrad

Is Kickstarter a Social Minefield?

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[Originally published on crowdsourcing.org, 7 Dec 2012]

Noreen Malone, a writer for The New Republic, doesn’t like what Kickstarter is doing. In her recent essay “The False Promise of Kickstarter,” she starts off by raising the case that donation crowdfunding is a “bright spot” in the current economic landscape and a more democratic way of supporting creative work. Then she attacks it by noting that crowdfunding favors projects that have strong online appeal, that some of the projects are silly, and that some projects fail to deliver. I don’t think Kickstarter fans disagree with any of these points. But should people be prevented from spending money on silly things, on Kickstarter or elsewhere?

Finally, Malone arrives at and develops what seems to be her deeper point: that the demand for donating to Kickstarter projects is not “real,” but is instead due to “peer pressure or idle boredom.” She problematizes the fact that Kickstarter “creates a relationship between consumer and merchant that is more like that of the one between donor and nonprofit.” And what’s worse, she concludes, other sites that resemble Kickstarter are sprouting up like weeds, not just for gadgets and films, but for things like funding local municipal improvements.

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