Raph Koster has a lengthy and generally excellent post up that touches upon microtransactions, virtual asset sales, DRM, copyright, and more. I wanted to comment on a couple things in his post.

He writes:

since anything that can be seen by our senses can be reproduced, for better or worse, all digital forms of enforcing copyright are doomed to fail. Every form of encryption is moot, because everything must be decrypted in order for us to see it. At some point, the data is in the clear, and then it can be copied.

I understand what Raph is saying, but with all due respect, I think he’s looking at copyright enforcement as a purely technological matter, when it is a combination of technology, social pressure, and legal deterrence and enforcement. The fact that there is not a complete solution is not an indictment of less-than-complete solutions except insofar as there’s room for improvement. Murders happen, which is not, I believe, an indictment against rules proscribing them. 100% solutions rarely exist in anything particularly complicated (or we’re not capable of finding them, which amounts to much the same thing in practice).

Raph goes on to come to a conclusion that jibes perfectly with how I think about the virtual “items” I built our business model on. It’s the context that matters. The the thing is, this is not a revolutionary idea, nor is it in any way inherently more applicable to digital vs. physical items. In all cases, context is king.

Just as a virtual sword has value proportional to the strength of the context in the mind of the purchaser, so does a real sword. So does a car. Consider: A car with a combustion engine is typically worth a fair amount of money currently. When the context changes and combustion engines no longer have gasoline to run on, the value of that combustion engine car will decrease in the absence of other compensating changes in context value, such as a collective social decision to value them for the sake of nostalgia or kitsch.

Everything, even food, is only valuable because of the context it exists in. How much an apple is worth to a purchaser varies greatly depending on the context, which includes how hungry he is, how available alternative sources of food are, and so on. I might pay $1 for an apple right at this moment (hmm, maybe $1.05, an apple sounds pretty good right about now), but strand me on a deserted island without food for a few days and I’d certainly pay many, many times more.

Things simply have no value in and of themselves, whether those things are gold bullion, bits and bytes in a database, or a stuffed mongoose. They only ‘collect’ (or reflect if you want to look at it that way) part of the value that the context they are in offers. Things like survival instincts cause a context (such as the deserted island scenario) to aggressively focus its power on a small range of value collectors (the bottom rung of the Maslow hierarchy), while in other contexts (such as everyday life), the power of the context is spread over a much larger range of value collectors. Don’t try to measure this kind of value in dollar terms, incidentally. Absolute dollar values only provide an apples to apples measure of value across different individuals when the supply of wealth available to each individual is the same. In other words, an apple might cost $1.50 a context of wealth (high end grocery store in a Western country for instance), and only 25 cents in a war-torn 3rd world country, but that doesn’t mean the apple is worth less to the starving inhabitants of said 3rd world country. It likely means their supply of wealth is simply far less.

I’d pay $2 for an apple in my hand at the moment.