Media Smash-And-Grab

On this episode of Diggnation, Alex Albrecht and Kevin Rose discussed file-sharing and theft, and how significant (if at all) the distinction between them was. This discussion was spurred by US government’s recent call for a crack-down on media piracy.

There’s a quote of US VP Joe Biden at the top of the story:

“It’s smash and grab, no different than a guy walking down Fifth Avenue and smashing the window at Tiffany’s and reaching in and grabbing what’s in the window.”

I am not here to argue that file sharing is okay. I am, however, here to stomp all over its equation with the theft of physical merchandise.


A Basic Business Model

Let’s start with a hypothetical store: Skippy’s Wonderful Widgets, owned by Skippy. Skippy’s Wonderful Widgets sells, surprise surprise, wonderful widgets. Skippy’s cost, when he orders widgets from his supplier, is $18 apiece. He sells these widgets for $20 apiece.

Before Skippy orders a widget to sell, his assets are, effectively: {$0}. That is, he has neither profits nor losses, and he has no inventory. (I could start him with some capital, but $0 makes the math a little easier. It means the same thing.)

After Skippy orders a widget, his assets are: {-$18, 1 widget}. That is, he has two items – a widget, and a debt for $18.

Now, when Skippy sells this widget – for $20 – his assets look like this: {$2}. The widget’s gone, but he got some money for it, and now he has more money than he started with. That is, he’s turned a profit. Skippy’s profit on each sale is $2. Yes, I’ve left out labour costs and overhead. I may get to that in a later post.

Forgive me if I sound like I’m talking to a five-year-old, but some of the people in this discussion talk like five-year-olds, complete with the childish name-calling.

A Precarious Position: Holding Merchandise

So, back to Skippy. When Skippy’s holding merchandise – when he’s got {-$18, 1 widget} – he’s in a slightly precarious position. He owes money, and he doesn’t really have much use for widgets except as merchandise to sell.

But! Skippy just needs to make one sale to move from having {-$18, 1 widget} to having {$2}, which is better than his original {$0}. Just one sale to recoup his investment and turn a $2 profit.

Smash and Grab

Now, lets look at theft – real good-old-fashioned smash-and-grab theft. A nondescript-looking customer wanders into Skippy’s Wonderful Widgets, then pockets a widget and bolts!

Okay, so “smash and grab” isn’t entirely accurate. Nothing was smashed. But Biden used the term, and it’s nicely evocative, so I’ll run with it.

Now Skippy’s in a real pickle. He started out with {$0}. Then he bought a widget, bringing him to {-$18, 1 widget}. Then that awful, awful person stole his widget, leaving him with just {-$18}. Well crap.

What’s Skippy to do now? He goes out and buys another widget, which brings him to {-$36, 1 widget}, then sells it, bringing him to {-$16}. Due to that $2 profit per sale, which we saw earlier, Skippy recovers $2 per sale. He needs to make $18 to get back to where he was before he bought that stolen widget, and $18 / $2 = 9. Thus, Skippy needs to make nine sales to recoup his loss.

Now, in the earlier case – where he moved from {-$18, 1 widget} to {$2} – his one sale didn’t just recoup his investment, it turned a $2 profit. Thus, to make this case the same as that one – to compare apples to apples – we need to move Skippy from his {-$18} post-theft black hole to {$2}. That’s a $20 difference. $20 / $2 = 10, so to move from the {-$18} calamity to the earlier, utopic {$2}, Skippy needs to make ten sales.

Let me say that again: to recoup from one theft of merchandise, Skippy has to sell ten more.

And even after he makes those sales, Skippy’s still behind. He’s $20 down from where he’d have been if he’d sold that stolen widget.

A Magic Trick

Now, that shoplifter. What that shoplifter did was… basic. Old fashioned. But understandable. It seems to be the only sort of theft Joe Biden and Nicolas Chartier understand.

But what if we had a more… well, a more magical shoplifter. What if the shoplifter could walk into the store, wave a magic wand, and duplicate the widget that’s sitting on Skippy’s shelf? Before the shoplifter walks in, Skippy has {-$18, 1 widget}. The shoplifter would walk out with a widget in his pocket, and Skippy would still have {-$18, 1 widget}.

We’ve seen this position before. We know that to move from “precarious” at {-$18, 1 widget} to “successful” {$2}, Skippy needs to make one sale.

Let’s dig a little deeper into this case. There are two slightly subtle sub-cases here, and they stem from what the thief would have done if theft (by magic or by sleight of hand) hadn’t been an option. There are two possibilities: he would have bought the widget, or he wouldn’t have.

If he would have bought the widget, then his duplication-theft of the widget robs Skippy of a sale. Where he should have had {$2}, Skippy instead has {-$18, 1 widget}. To get from one to the other, Skippy needs to make one sale. If he wouldn’t have bought the widget anyway, then Skippy both should have and does have {-$18, 1 widget}. To get from where he is to where he should be, he needs to make zero sales.

A Comparison: Holding, Smashing, and Magic

When all goes well, to turn a $2 profit, Skippy needs to make one sale.

When a widget is stolen, to turn a $2 profit, Skippy needs to make ten sales.

When Skippy’s merchandise is stolen by means of duplication, to turn a $2 profit, Skippy needs to make zero sales or one sale.

10 is not “no different” from 1. 10 is not “no different” from 0.

10 > 1.

10 > 0.


There is absolutely a discussion to be had about file-sharing and piracy. Of those who pirate stuff – music, movies, software, whatever – some would have bought it if piracy hadn’t been an option, and some wouldn’t have. That is, some represent lost sales, and some don’t.

What’s more, piracy can also lead to gaining sales. A person might discover a musician through piracy, then go out and buy that musician’s work. Some creators depend on this exact principle, freely distributing large portions of their catalog for free, hoping that increased recognition and goodwill will earn them sales.

On the other hand, there’s the simple permission issue. This was one of Metallica’s (many) positions on the subject, back in the Napster days – that, regardless of profit and loss, their stuff was taken without permission. And that’s a fair argument. But it’s not the argument being made.

My point is that there is a worthwhile discussion to be had here, and glibly equating piracy with physical theft completely short-circuits that discussion.