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Lessons from the Dark Side of Capitalism: How Pirates Help to Shape New Industries

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Businesses should pay attention to the practices of pirate organizations, because piracy has reshaped industries and given birth to new ones since the dawn of capitalism. For example, sea pirates fought the monopolies of the East Indies companies in the 17th and 18th centuries and forced recognition of the freedom of the seas, pirate radio defeated the BBC’s broadcast monopoly, and online file sharing through Napster triggered an overhaul of the music industry. Rather than simply threatening capitalism, pirate organizations indicate the directions in which the economy is likely to move. This article discusses the history and future of piracy and puts forth five lessons for managers. 1. Take the long view and become an industry leader, recognizing the unsustainability of consensually legitimate industries. 2. Acknowledge that opposition to your industry might point to legitimate problems. 3. Don’t sue your customers. 4. Ally with pirate organizations if it suits economic opportunity. 5. Don’t slow down industry progress through monopolistic arrangements. The article concludes with an assessment of how the music industry violated these axioms in the late 1990s.
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