Silicon Spin July 2000

Hey there, welcome to Silicon Spin, the show that tackles high-tech issues. I'm your host, John C. Dvorak. And before we introduce today's panel of gadfly pundits, remember you too can be a pundit. Just visit the website siliconspin.com and express your opinion for your own chance to win The famous mug. Today's topics on Silicon Spin: Metallica's message to Napster, digitize this. Is this a matter for Congress to decide? And Kevin Mitnick gets permission to speak. We'll see how our panel feels about his profiting from others' losses. First, let's introduce our panelists. To my right, Tony Fernandez, co-founder and CEO of Bow Wow House, a software company focusing on child development products. He also founded the user— or the Netscape User Experience Group.

Hi.

Deborah Branscombe over here, contributing editor for Newsweek and Upside magazine. She's covered technology for more than 15 years. Maybe it's time to take the sheets off the bed. Kevin Surace, CEO of Perfect.com, a B2B infrastructure provider. He's also a frequent Spin guest. And finally, Marty Perlmutter, evangelist, as it were, for broadband and wireless at LookSmart. It's an online search and navigational site, if you didn't know. He's also a frequent Spin guest. Welcome, everybody. Politics makes strange bedfellows. Who would have thought that conservative Senator Senator Orrin Hatch would be making music with Metallica. Hatch is a musician of sorts. He writes country and western songs, and he's turned an attentive ear to the digital download controversy, inviting Metallica's drummer and Napster's CEO to make their cases on Capitol Hill.

If you're not fortunate enough to own a computer, there's only one way to assemble a music collection the equivalent of a Napster user.

Theft.

Walk into a record store, grab what you want, and walk out. The difference is that the familiar phrase, file's done, is now replaced by another familiar phrase, you're under arrest.

The reality of, of our economy, I think, is that if what those people are doing is legal, then we will have the right at some point in the future to work out a business model where we can derive some economic benefit from making that legal activity more convenient I'd recommend you all take a look at Salon magazine.

There's a Courtney Love article in there that's quite interesting.

It's fabulous.

Meanwhile, Kevin, do you expect Congress will be able to come up with a solution itself, or is this just a lot of wheel spinning?

You got a number of problems here, the first of which, Orrin Hatch should never make music. The second of which is that the problem is not just Napster, which, you know, which everyone knows is a piece of software you can put on your computer that's really a directory that shows you what other people have on their computers, and then you can go grab stuff from them. The real problem goes back to about 20 years ago when CDs were developed. They were developed with a serial copy management protection scheme on them for audio players, but that scheme was never followed through to CD-ROMs. So the problem is anyone in the world can put a CD in their computer and make a digital copy in MP3. And once you can do that, whether there's a Napster or there's email or there's websites or whatever, people are going to share audio files. I don't know how to stop it. I don't know how to stop it. I don't think Congress is going to know how to stop it. But it goes back to, you know, a 20-year-old law, and they goofed up. They never considered that computers would have CD-ROMs that could read audio.

Well, there you have it. It's a screw-up.

That's right. They never thought through much about CD-ROMs.

It's true.

I mean, that entire industry, such as it was and is, was a series of accidents. And here you have 20-year-old technology and a 20-year-old kid creating directories, subdirectories that access hundreds of thousands of people's collections of stuff. And what does Congress have to do with this? I mean, really, it's— whatever they say, wherever they point, whatever alarm they speak of won't mean squat.

You'd have to arrest 20 million people.

Yeah.

But the issue is less Congress, I think, than it is the recording industry trying to hold back what the natural process of the web has been all along, which is cutting out the middleman, right? We're not— I think the issue is less the musician benefiting from this and being able to get money. I think it's the recording industry wanting to wedge themselves still in the middle Even though technology is going to allow a whole new distribution model.

That's quite so. But in the meanwhile, I mean, I don't know if McLuhan could solve this or not, probably not, but you've got BMI and ASCAP and other, you know, examples of intermediaries or infomediaries gathering up monies. There may be some kind of accommodation like that where there's some pool that's created.

I think the record companies are hosed. They just haven't figured that out yet. I really do, because Courtney Love, you mentioned the Salon.com thing, she's great. She's like, I'm not afraid of the fans. I am convinced that if they hear the music that they respond to and they love and they enjoy, they will give me the amount of money that they think I deserve. The record companies, according to Courtney, are the real pirates, not the people using Napster. And I think that's a great, interesting point and very reflective of how a lot of the web people think about this.

Another interesting point is, up until about 70 years ago, there was no money in recorded music because there was no recorded music. And for thousands of years, the only way musicians got paid was to go and perform. And you got paid from that. And for about 50 to 70 years, there was this recorded music as a distribution medium, and you'd pay to have music distributed. How come we're told—

what you're saying, how come we're told that if this continues, there will be no more music?

Well, there was music before there were records. Lots and lots of music.

Especially drumming. There's gonna be a hell of a lot of drumming.

I think drumming— I'm a drummer, so I go along with that. But I actually believe that the cat's out of the bag. We'll never get it back in the bag. Bands and musicians who take advantage of the fact that there is now this free distribution, they will use that to their benefit to enhance their opportunities for performance, for live performance, and that's how they're going to make their money.

Haven't sales actually increased, actually maybe possibly disproportionately to what they should have?

Yeah, this is the claim.

It's like this Esther Dyson thing about, look, you have to give away a whole bunch of stuff in the internet economy, but you end up getting it back in different ways.

Yeah, but that was B2C.

That was before.

But look at what the recording industry is saying.

I'm just on vacation now.

They tried that.

Look at what the recording industry is not saying. They're not saying, hey, we're going to come up with a superior model. We're going to take this idea and now we're going to use all our intellectual property to create a new business model around this. They're saying we're going to squash this.

Sure.

The RIAA says we'll see in court. They don't say we're going to protect the artists.

They're saying mine, mine, mine, mine.

The RIAA also pushed through that work-for-hire law that now makes musicians basically slaves. I know, but talk to me about taking care of the artists.

The recording industry doesn't take care of the artists.

This is a law that basically says that if you write a song for a music label, they own the copyright forever, and you really don't even have rights to your own song.

In your articles, you keep the copyright, right?

I tend to share the copyright. I don't have a work-for-hire contract.

But you have the right to sell it again?

Yeah.

And then typically— What about Metallica? What are their constraints?

Depends on what kind of contract they signed.

If they signed today, if they were a new band signing today, they'd be screwed. They probably have some leverage because they've been around for a while.

I mean, having lived through the whole Netscape experience, I see A little bit of shade of Microsoft wanting to squash, you know, that browser world that opened up technology to everybody.

Maybe, but Microsoft did win. So we're ignoring that one point. But in this case, the record companies aren't going to win. The distribution model is gone, and they're never going to get it back. And over some period of time, 5 or 10 years, it's going to be gone for good.

They won, but they adopted a new business model.

Yeah, you know what, they're still—

They're hosed.

They're hosed.

They're making more money than ever. Coming up on Silicon Spin, going boldly where no ad has gone before, is Pizza Hut opening up a whole new universe for dot-coms? Stay with us. Welcome back to Silicon Spin. Forget about billboards and bus stops. Dot-com ads are turning up on any space available, any blank space. I'm waiting for them to be printed on the urinal itself. Java jackets, paper bags, receipts, and stickers on fruit, for example. That's a good one. Now the cosmos is being invaded by commercials. Pizza Hut reportedly paid $1 million to stamp its corporate logo on the side of a Russian Proton rocket. That's right. An important one.

Unbelievable.

That's the one that's taking the inhabitation module up to the moon.

It's doing something. Landon's probably rolling in his grave, whatever it's doing. Marty, is space the final frontier for advertising?

Well, it may be, but I have an important announcement. That's okay. I don't care about sticking a sign. I mean, Martin, Marietta, and Lockheed.

Been doing it for years.

Been doing it for years. And Atlas, you know, the RCA, GE, Sony.

Yeah, okay, okay.

My point is, that's all right. But if anybody ever does that stupid thing we've heard about where you put like this thousand-foot-long string of lights into space, I will gather money from my dot-commy millionaire friends. I will go to an island that's not governed by U.S. or British or Soviet, and I will build with my space rocket engineer friends something to shoot that thing down unless they have in launch space things.

They're gonna stop me.

Now whose idea was this to put the big lights up in space like that?

Some morons.

Some morons.

Advertiser.

So.

You can do what you want, because that thing burned up before it got out of the atmosphere.

Do you think that—

You put something up there, we'd be talking.

What about some of this other crap, like this thing here, which is a— what is this thing called?

That's a protection mechanism. That's a coffee prophylactic. No, it's a Java jacket.

It's a Java jacket. It doesn't fit.

Not on that one.

It's a typical Java coat.

The mugs are defective, Jon.

This is the one here. Now, this I understand is a barf bag, right? With the red herring thing on it? No.

No?

Looks like a barf bag. No?

Barf bags have those things at the top.

Oh, OK.

No, your lunch comes in that, John, if you order out from a deli.

Well, there's a weak link in this shock and approach to ads, which is the recipient are usually thinking human beings, although that isn't usually thought of. And I think people are really underestimating the backlash, as I had when I picked up an orange that asked me a question, you know, to send me to a dot-com.

Did the orange ask you a question?

Well, actually, the orange didn't ask me a question.

Don't mention the company.

I'm not going to mention the company, but what I will say I mean, I wasn't— I didn't know what my reaction was supposed to be. It asked if it was ripe or not. I thought maybe I should put it down, go online, check it out, maybe bring it back. I mean, it seems—

Was this just a label?

The label.

It wasn't like a little thing that actually had the voice in it?

No, but that'll probably be next.

But here's the irony. Advertisers pay money to get people's attention because we're jaded in unusual ways because we're so jaded because we're completely bombarded by advertisement.

But they're in— I think the new frontier of advertising is really one of personalization. It's really using the power of the network to take interested buyers or consumers and putting them together with producers. And I think the future really lies in personalization of content. And, you know, you can look at some of the new technology, linguistic technology coming out from companies like Insight that just split up from Xerox PARC, that bring a whole new way—

No, just a new way of advertising.

Yeah, OK.

You realize that Adbuster says that there's The average guy floating around is 3,000 impressions a day. I do realize that. You do.

I do realize that, but you know, the bottom line is these things, as you've heard me say before, tend to even out over time. Everything finds its level. And in this particular case, as more and more ads bombard you and you get more and more immune to them, then the response rate they'll get will go lower and lower.

Yeah, but that means they have to add more and more ads. That's what, you know, I always thought that's what zoning was all about. Whatever happened to these laws? You go to Vermont, you don't see billboards.

You go to Marin, you don't see billboards.

A lot of data on this, right? All these cable channels— geez, ZDTV is one, right? All these cable channels, yet still the networks garner by far the majority of advertising and the largest ad dollars and the most ads, and they have no problem selling out because if you're going to do an ad, you go for the big thing and catch the whole audience.

Here's the problem I have with that desensitization— I can't pronounce it.

Desensitization.

Thank you. That's why I didn't go into broadcasting. I can't pronounce anything. But it's not like the ads go away. It's not like, oh, advertisers will figure out that it's oversaturated and they'll stop doing it. It doesn't mean that suddenly they won't start doing billboards and they won't start, you know, plastering the buses and everything with these, like, huge advertisements.

You ever been on one of those buses? It's like being in a cave. You see them barely.

They're, like, advertising on ferries and they want to advertise on the Golden Gate Bridge and toll roads.

Is there any way to stop it?

Well, I think public communities I'm serious about this. I think it's basically immoral for public governments to accept advertising because there should be some public space which is immune to advertising where people can just, like, be.

Okay, but if you're town government, you say, you know, we could take this amount of advertising on our buses or this or that, or we could raise taxes, you know, 2 cents a thousand next year.

Or we could just close the schools.

Yeah, you know, the people say, Take the ads. It's fine.

You have to draw the line somewhere. In schools, menus are being sponsored by Burger King.

It offsets the price.

Yeah, and kids are getting crappy lunches as a result and a terrible nutrition education.

The Whopper isn't a bad burger. That's—

these hamburgers that these guys make have a bunch of wood in them. I don't know if you know that or not.

The tragic thing is how, in a way, how uncreative this kind of approaches, because there are lots of ways where it could really benefit people and create really positive reactions around brands doing proactive, positive things in people's lives instead of just plastering everything.

You know what? I agree with him. We should stop plastering ads and just give us the money at Silicon Valley. Baby wearing— we're not talking about diapers— is coming up. Stay with us. Welcome back to Silicon Spin. Is there a minimum age for using a computer? You wouldn't think so with all the baby software, or as we like to call it, lapware, on the market. Early learning programs such as Baby Wow are meant for toddlers as young as 9 months, some say 6. It uses sounds and images and aims to teach babies basic concepts like numbers, how to balance a portfolio, to do a 10-K, that kind of stuff. All these things. Some child experts worry about exposing children to technology at such a young age. It shouldn't replace human interaction, they say. Tony, how do you respond to that?

Well, I think the issue is really posing a question: should computers be in the home? And the cat is out of the bag, way, way out of the bag there. The computer is an appliance that's in everybody's home these days, and kids are going to be exposed to it whether we like it or not.

Oh, Tony, that is so lame. I'm sorry, but that's like, you know, it's like there are cigarettes in the world, so we might as well teach the kids how to smoke early. That's true.

So you're saying that computers are like cigarettes?

Is that what you're doing?

You're saying that computers are going to cause lung cancer? No, no, I'm not serious. That was out of control inappropriate analogy. But I have to say, That Lapware for 6-month-old kids is just ridiculous. This is a product, it's— that's a solution searching for a problem. There's no problem there.

There is definitely a problem, which is parents, including myself, spend a lot more time in front of the computer. And the question is, when the child comes up and wants to imitate me, wants to imitate the parent, are you just going to usher them away, or are you going to ask the question, could something beneficial or creative be put in that computer that the parent and the child can share? I would argue that it will increase the socialization of the child and the parent because parents are spending so much time on the computer rather than the opposite.

But there's no evidence of that whatsoever. I told a friend of mine who's a child psychologist about this stuff, and she burst out laughing. There's no evidence based on our evolutionary development that any child's development is in any way hindered by not being exposed to computers at the age of 6 months.

And I would be the last to argue that that should happen.

Does anybody out there have an opinion on this?

They're arguing quite nicely.

I have no problem with kids and computers personally.

The computer's been around for about 3 life cycles of a butterfly, and so what the hell do we know or could we know about its impact?

Well, exactly.

My daughter, who's now 21, when she was very small, I got one of those, you know, write your own little wordy things and hold it up for the baby and see if the baby can recognize the words. It was just like a stupid fun game, and we did it. We did it until she got 25 words at the age of 1 and a half, and I threw the stuff away. But not— I mean, if I had a voice recognition device, if the screen floated in some really cool way, or I could hold it up on my new groovy 3G phone, or if it was easier, it would make plenty of sense. Why not have a video mobile hanging over the kid?

Well, you're absolutely right, and I think the issue is this is like the last vestige of xenophobia, because to the child, it's a bunch of glass.

Does this have to do with the TV show X-Files?

Yeah, I actually— I have no phobia about technology.

That's a word I expected from you.

It's fine. You know what, Deborah, I hear what you're saying about no evidence, but the bottom line is this is becoming a very, very computer-centric society whether we like it or not. And exposing kids to certain things at an earlier age isn't— I doubt is going to hurt them. I hope it doesn't displace 100% of the social aspects of what they should be doing, but in addition to other things, I think there's nothing wrong with learning from better, more automated learning tools as well as some exposure to the whole computer environment. It's not gonna hurt anything.

What's the alternative? Is it to discourage a child's curiosity?

No, but let's back it up and make the issue more interesting. Let's go back to the 9-month thing.

I mean, I— 6 months! His website says 6 months.

Come on, a kid's gonna put some goo on the screen and drool on the thing. It's gonna be a mess. You're gonna have to have one of those plastic adults do that. That's right. Bang on it.

And that's exactly the way it works. The child bangs on it. And it's something that the child and the adult can share when the child begs for it.

Do you have any kids?

Yes, this came about because of my kids.

You don't find that the kids are bored stiff until they're about 2 or 3 years old when they get confronted by one of these computers? They just— there's nothing there for them.

That's the thing. Parents are spending a lot more time in front of the screen and they want to imitate them. And the question is, what could we do to let them safely imitate the parent?

You know, and that's okay. But here's the problem. And I don't know if this is a real quote or not, Tony. But this says— this purports to be a quote from you saying 9 months to 3 years is the only age that matters in terms of real brain development. And I have a real problem with the notion that parents, guilty parents, are being deluded into thinking that, you know, their kids aren't gonna be smart enough unless they prop the 6-month-old in front of the computer.

Is it gonna hurt a child? Do you believe that it's gonna hurt a child? No, no, no. Come on.

It depends. This is what I think. I think if a kid is spending time in front of the keyboard with the parent instead of like playing with blocks, that's a bad thing.

Kids don't need to get on computers until they're like 10. Kindergartner. No, no, kindergarten.

But the point is, it's like, it's not like you need to be exposed to computers.

You know what, is it hurting anyone?

If you're substituting it for actual—

don't let Joe— nobody is suggesting that.

He's gonna cut us off.

It's because you guys are spinning your wheels here. The fact of the matter is kids should learn C++ as early as possible. Right. And support the parents. Kevin Mitnick, meanwhile, has the right to speak. Does he deserve to profit from his crimes? That's our question next. Stay with us. Welcome back. Kevin Mitnick, computer hacker, is now Kevin Mitnick, security consultant. His lawyer says the feds have made a 180-degree turnaround. Mitnick has gotten approval from his parole officer to write an online column lecturing us about hacking, and he's going to sell his knowledge to private companies. But he still won't be able to use a computer, which is kind of interesting. Deborah, he's admitted of causing millions of dollars in damages. Should he now make millions of dollars from his experiences?

Why not? I mean, look, he didn't rape anyone, he didn't maim anyone, he didn't kill anyone. I'm sure, you know, he—

So you think any criminal that does white-collar crime should benefit from it?

No, but look, I mean—

I'm into that.

If you can make money sticking ads on bananas, you know, the country's filled with pundits. Why not Kevin?

I'm not sure he's really benefiting from the crime. He is benefiting from his knowledge, and in fact, the very best I know, because I've worked with IBM Security Group, and some of their very best hackers really came— I mean, they hired them because they were really hackers as 18-year-olds. Of course.

But in organizational intelligence, this is the way it always is. The National Labor Relations negotiator goes over and works for the union.

And this is just the way it's done. But somebody can use that talent to bring forward a security hole and not do something destructive.

Kevin wouldn't do that.

Once a hacker, always a hacker.

No, I think he's using his knowledge in a positive way now.

Thumbs up to Kevin. He was given a low fine, basically, because the judge actually said that he was going to be working for minimum wage.

And he is. He's going to be working with an abacus and a wireline phone.

I guess working with a typewriter is just as bad as working with minimum wage.

I wonder if he can come up with any interesting software with an abacus and a wireline phone.

I think we could all use some software that uses an abacus. Anyway, that's it for today. I'd like to thank our panelists, Kevin Surace from Perfect.com. And by the way, Kevin, happy Happy birthday. Why, thank you very much. How old are you today?

Oh, 38.

He decided— yeah, right. He decided to come here instead of be with his family. Isn't that sweet? Also, thanks to Tony Fernandez of Bow Wow House, Deborah Branscomb from Newsweek, and Marty Perlmutter of LookSmart. I'm John C. Dvorak. Thanks for watching Silicon Spin.