“The Social Network,” Entrepreneurship, and Intellectual Property

by Stephan Kinsella on October 25, 2010

The Social NetworkThere are some good commentaries up on the superb Facebook movie, The Social Network: The Daily Caller’s ‘The Social Network’ and the case against intellectual property rights and Jeff Tucker’s A Movie That Gets It Right, as  well as Robert Wenzel’s The Social Network: The Movie that Could Save Us All.

In my view, the movie fails in its apparent attempt to show the Zuckerberg character as an asshole (I don’t know how true to life the character is), other than the way he treated his girlfriend in the beginning. It’s also hard to tell if the movie intended to show how ridiculous some intellectual property claims are, but as argued very well in the Daily Caller post, the movie does show this. One part of the plot concerns twins Tyler and Cameron Winklevoss, whose plans for an exclusive Harvard student network were upstaged by Zuckerberg, leading them to complain that he “stole” their idea. As the Daily Caller post notes:

“If you had invented Facebook, you would have invented Facebook,” Zuckerberg sneers, dismissing the Winklevoss twins’ contribution to the existence of Facebook. Yet it’s indisputable that the networking site the twins envisioned at least partly inspired Zuckerberg, who gave them the run around for weeks while quietly launching a rival site.

Dubious as Zuckerberg’s tactics may have been, “The Social Network” does not consider him a criminal. Audiences shouldn’t, either.

… In an age where websites like Facebook have made it easier than ever for people around the world to interact and share their ideas, laws shouldn’t stand in the way of the free flow of information and innovation.

During a legal hearing, Zuckerberg makes the ultimate statement against intellectual property rights, asking, “Does a guy who makes a really good chair owe money to anyone who ever made a chair?” If people value Facebook and the system that made its development possible, the answer should be a resounding no.

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Sheldon Richman October 26, 2010 at 11:05 am

One can reject all IP and still suspect that Zuckerberg treated the Winklevosses dishonorably. As I understand it, they didn’t just casually mention their plan to Zuckerberg. They hired him to do the programming. True, they could have drawn up a detailed contract restricting Zuckerberg’s conduct and had him post a performance bond, but is that required before Zuckerberg is obligated to treat them them with more honor than he apparently did? In other words, stealing property is not the only way one person can wrong another. I’d be happy to have my error pointed out.

Stephan Kinsella October 26, 2010 at 3:41 pm

Sheldon, I agree that it’s possible to act wrongly or dishonorably even if no rights are violated. But I saw nothing in the movie, at least, that clearly indicated that. As for the CFO character: his interest was diluted but apparently this was pursuant to contractual procedural rules that he agreed to. As for the Winkelvosses, I didn’t see enough presented to show that Zuckerberg acted dishonorably or wrongly at all. They hired him to write some code. I don’t know if he ended up writing it, but even if he didn’t, so they just don’t pay him the fee. Does hiring someone mean you buy the rest of their life? I suspect Zuckerberg had ideas and was building his own site, and meanwhile kept stringing along the Winkelvosses as another option in case his idea didn’t work out. I see no problem with this at all. I mean what, in particular, did Zuckerberg allegedly do, that was “dishonorable”? You would have to allege it clearly, and provide proof of it, to judge him this way. Freedom to me is the default. Freedom to quit a job at any time. Freedom to compete. Freedom to fire people and hire who you want.

You say, “”stealing property is not the only way one person can wrong another. I’d be happy to have my error pointed out.”

Your error, as far as I can see, is not your assumption–surely stealing is not the only wrong. Your error is to assume Zuckerberg wronged the Winkelvosses. I don’t see a coherent argument for this contention.

Sheldon Richman October 26, 2010 at 4:02 pm

I am at a disadvantage because I have not seen the movie and have no independent information about Zuckerberg’s relationship with the Winkelvosses. I was simply taking at face value and reacting to what you quoted: “Yet it’s indisputable that the networking site the twins envisioned at least partly inspired Zuckerberg, who gave them the run around for weeks while quietly launching a rival site.”

So they hired him to implement their site; he stalls them (leading them to believe he would do the work) while he capitalizes on this inspiration and launches a rival site. That seems unkosher to me. I am not saying the Winkelvosses an actionable claim or that their rights were violated. They didn’t need to be so trusting; they could have made other arrangements. But I’m saying they have a right to feel they were treated badly. Why didn’t Zuckerberg tel them he would not be doing the work and that they should find someone else? I know why. He didn’t want them to find someone else until he launched his site. That should be perfectly legal, but he nevertheless misled them and therefore wronged them. He took advantage of their trust. Anyone can see that. No esoteric moral/legal theory is required. I’d rather the free market weren’t seen as having a “tough shit” ethic at its very core.

Jeffrey October 26, 2010 at 4:09 pm

I understand your point but in the fast moving world of web apps and geeks, anyone who doesn’t anticipate a “though shit” attitude is going to get run over. You live and learn. ALL web developers have to figure this out. It’s the same in anything. If you have ever contracted for services on your home – brick layers, sprinkler repair, painting – you learn early on that 75% the guy isn’t going to show up. You learn to anticipate this and find the work around. And you learn to figure out when you are getting the brush off.

By the way, it is not at all clear that Zuckerberg was trying to screw them. He just got caught up in his own project. And it is laughable that the the Winkel twins (who only really cared about rowing) would have been able to compete against Facebook, even with the best coder. Again, this happens constantly. Kvetching about this stuff is a complete waste of time, and suggests that a person is in the wrong line of work.

Not all of life needs lawyerfication.

Sheldon Richman October 26, 2010 at 4:14 pm

My remarks should have made it abundantly clear that I do not favor lawyerfication. Why throw in that red herring?

Stephan Kinsella October 26, 2010 at 4:17 pm

Sheldon you are the one who mentioned lawyerification, IIRC; we agree: this has nothing to do with that.

Stephan Kinsella October 26, 2010 at 4:11 pm

Sheldon: see Jeff’s post, and his comment here. I agree wit h him.

“I am at a disadvantage because I have not seen the movie”

Try The Pirate Bay dude :)

“and have no independent information about Zuckerberg’s relationship with the Winkelvosses.”

Me neither; I was going by the presentation in the film.

“So they hired him to implement their site;”

Sheldon, what does “hired” mean in a free society? It means I will pay you $X if you do &. That’s all. Y is a conditional trigger for a transfer of title to property. That’s all.

” he stalls them (leading them to believe he would do the work) while he capitalizes on this inspiration and launches a rival site.”

Stalls? He’s a student. He’s busy. He has other things he is intersted in. So do they–like “kreweing”. So what if he “launches a rival site”. It’s a free country. So what if he doesn’t do what they “hired” him to do?–so they don’t pay him.

” That seems unkosher to me.”

Yes, it is the “seems” that I am saying I need more elaboration of. Anyway the rich-boy twins got $65M for Zuckerberg’s work. I’m sure the left-libertarians would say 98% of that is “stolen”.

“I am not saying the Winkelvosses an actionable claim or that their rights were violated. They didn’t need to be so trusting; they could have made other arrangements. But I’m saying they have a right to feel they were treated badly.”

Technically speaking they have a right to “feel” whatever they want. But are they right in feeling cheated? I am not sure. I don’t think so.

“Why didn’t Zuckerberg tel them he would not be doing the work and that they should find someone else? I know why. He didn’t want them to find someone else until he launched his site. That should be perfectly legal, but he nevertheless misled them and therefore wronged them.”

Who knows what they planned for their site. I see no evidence that he “misled” them. They are big boys.

“He took advantage of their trust. Anyone can see that.”

I can’t. Not apparent to me. Not with the facts as presented. Maybe you should see the movie?

“No esoteric moral/legal theory is required.”

No, but a coherent claim and facts are.

“I’d rather the free market weren’t seen as having a “tough shit” ethic at its very core.”

I don’t think that’s it at all.

Sheldon Richman October 26, 2010 at 4:26 pm

The quote says he “gave them the runaround.” “Stalls” was my faithful paraphrase. I thought we are taking taken the quote as accurate. If so, there’s no need to play innocent or ignorant about his lack of performance. Speaking of lawyerfication, your defense overflows with sterile legalism. I never said he violated their rights. I said he treated them shittily. So questions such as “What does hired mean?” are irrelevant pettifoggery. According to the quote, they had an understanding. He let them hang in the dark while he started a rival site. That’s shitty treatment. I’m not looking for a lawyer. I’m looking for a commonsense ethicist. Since this isn’t about IP, I guess the discussion really doesn’t belong here.

Stephan Kinsella October 26, 2010 at 4:31 pm

Sheldon, I saw the movie, so did Jeff. I am simply saying the movie does not show, for me, any clear rights violation or even wrongful action. I already agreed with you: if you do something wrong, it’s wrong, even if it’s legal. I simply don’t think this has been demonstrated in this case. If you see the movie and see evidence that this quasi-fictional Zuckerberg did something “wrong,” I’d be interested. My guess the real Zuckerberg’s got a payoff because the legal system allowed them to extort Zuckerberg at a vulnerable moment. So it goes.

Jeffrey October 26, 2010 at 3:45 pm

Code monkeys are hit on constantly by people looking to put in place their great new thing. They often say yeah sure that’s a snap and then put the guys off for indefinite periods.

I should know. I’ve had it happen to me dozens of times, and, really, it is no big deal. If the code guy doesn’t come through it is because he didn’t feel inspired by the project. And if he doesn’t come through with some other project, it is because he was drawn to it instead of yours. That’s life. Real life: not some IP dream world in which there are ownership units for everyone’s ideas and every off-the-cuff remark becomes something enforceable by the state.

The idea of social networking was everywhere in 2003, and hardly unique to the Wiklevosses or Zuckenberg. Heck, I was thinking about it in those days, dreaming up various plans. What those goofy twins had that others didn’t have was money ready to back their idea of ConnectU, money they later rolled into a deep pockets looting operation. What Zuckerberg had that the twins didn’t have was both a viable plan and the technical means to put it in place.

Anyone can dream. Zuckerberg did more: he acted on a project he felt confident about.

Sheldon Richman October 26, 2010 at 4:28 pm

Jeffrey first used the word “lawyerfication”:

“Not all of life needs lawyerfication.”

Sheldon Richman October 26, 2010 at 4:35 pm

I reserve final judgment until I see the movie and am convinced it is faithful to the facts. But if the quote above is accurate, there was a moral — not a legal, must I repeat this? — lapse.

Stephan Kinsella October 28, 2010 at 8:04 am

Sheldon, I just came across an article going over the reality vs. movie: http://www.thedailybeast.com/blogs-and-stories/2010-09-30/the-facebook-and-zuckerberg-in-the-social-network-arent-real/full/ — they conclude Saverin was only an “accidental billionaire” and re the twins, says:

What about the role of the must-have-been-made-up-but-in-fact-weren’t Winklevoss brothers—identical-twin super-athletes who towered over the diminutive Zuckerberg and hired him to write software for a social network they had wanted to build called Harvard Connection? With their friend Divya Narendra, they did have an idea, did hire Zuckerberg, and did later sue him. Were they as important as the movie makes them out to be? No. My reporting led me to conclude they had little to do with the story of Facebook.
In fact, the Winklevoss-Narendra team had few if any original ideas about how to make a college-based social network. The movie Zuckerberg rightly points out that their idea didn’t sound much different from Friendster and MySpace, then making big waves.
One of the twins appears to impress him by saying what will make Harvard Connection unique is a requirement members use Harvard.edu email addresses. While this might have seemed original to the twins and Narendra, in fact a service called Club Nexus began operating at Stanford University two years earlier using that very approach, and similar services were either in operation or about to be launched that year at Columbia, Yale, and Baylor University, among others.

But while he didn’t steal their ideas, it seems likely Zuckerberg deliberately misled the Winklevosses and Narendra about his intentions. He later said, as the movie notes, that he quickly realized their ideas were half-baked and impractical. But he didn’t tell them that for months, and then only when the launch of his own site was imminent. Zuckerberg appears to have deliberately led them on, apparently to delay their own potentially competitive project. Instant messages involving Zuckerberg which have surfaced since I completed my book and which he does not disavow buttress this conclusion.

If this is accurate, he did “mislead” the twins so as to delay his competition. Whether this is immoral, dishonorable, or wrong or not, I cannot say, without more context–but given these bare facts I don’t see that he did anything wrong. Competitors mislead each other all the time. If he was half-considering working with them while firming up what he really wanted to pursue, this is just life. It’s a mixture, and messy, and complicated. To me this is just competittion and business.

Sheldon Richman October 28, 2010 at 8:49 am

Well, the quote sure seems to back up the assumption I have been going on, acquired from the quotation you first used. Look, even if the movie is wrong and Zuckerberg didn’t do what it suggests he did, that simply shifts the discussion to the hypothetical: What if someone else did it? It’s assholism, pure and simple, legal and nonaggressive, but assholism just the same. Call it competition if you will, but that sort of thing — the legalistic shunting aside of commonsense morality — is what often turns people off to economic freedom. The market absent a thicker underlying morality is repugnant to many people, and for good reason.

Stephan Kinsella October 28, 2010 at 11:17 am

Sheldon, maybe we are talking past each other. I agree that “the quote sure seems to back up the assumption I have been going on, acquired from the quotation you first used.”

I also agree that “The market absent a thicker underlying morality is repugnant to many people, and for good reason” (though I disagree with the coherence of “thickism” itself as anything more than a commonsense, fairly obvious observation).

I also agree that assholism is wrong, etc.

Our disagreement is that I am not persuaded that the bare facts as publicly known here back up a charge of “assholism” on Zuckerberg’s part. So I agree that the facts are as you stated, and that being an asshole is wrong, and that being libertarian is not all that matters. I simply am not persuaded that on these facts, he’s been shown to do anything immoral or assholish. This is because of my perception and understanding of how the competitive business world operates, in which I see nothing wrong with competitive actions like this. In short, this does not seem “over the line” to me–not over the rights line OR the ethical line. BUt I agree with you that sometimes you can go over the ethical line even while not being a libertarian rights violator.

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