Internet entrepreneur Joi Ito is promoting licences that allow artists and academics to share – and profit from – their work online

Joi Ito, CEO of Creative Commons, wants to ease the 'friction' in information sharing online Photograph: Alicia Canter for the Observer

Joi Ito, 44, an entrepreneur and venture capitalist with a particular interest in the world wide web, was an early investor in Twitter, Technorati, Flickr and Last.fm. He grew up in Japan and the US; he once owned a nightclub in Tokyo and worked as a DJ in Chicago. Time magazine hailed him as a member of the "cyber-elite" in 1997 and two years ago Businessweek named him "one of the 25 most influential people on the web". Ito has a special interest in issues of copyright in the digital sphere and is CEO of the organisation Creative Commons. He is now based in Dubai.

What is Creative Commons?

It is a non-profit organisation with volunteer judges, lawyers and activists in 80 to 100 countries. We create software and technical and legal tools that allow people who create content to mark their works with permissions and restrictions that they would like other people to adhere to. People don't have to ask each time how they can use the work and search engines and software tools know the intent of the author, lowering the friction of sharing and encouraging collaboration.

How does it work?

It establishes a standard set of legal and technical tools that allows interoperability. When the web came along, it was based on an open standard, so anyone could create a website or a little start-up company. The web is interoperable, which reduces the friction [of any transaction] and lowers the costs of creating things. This creates lower costs of innovation.

Look at Wikipedia or Skype or eBay – all of these would have seemed like dumb ideas before they were created, yet in retrospect they seem obvious. By reducing the cost of failure and allowing all kinds of people to try things, you get an abundance of innovation.

So my assertion is: as each layer involved in a transaction becomes cheap and interoperable, the next layer becomes the friction spot. We've been going up, from the telecommunications layer, to the content layer to the point at which there's an abundance of information that can connect – but we've hit the legal friction spot.

Now, just as we got network and software guys out from the stack and got them to move on to do more interesting things – solving successive problems and reducing friction – we're trying to remove lawyers so they can do more interesting things. The result, I hope, is we're going to have an explosion of innovation in the content-sharing space.

Aren't our concepts of copyright ownership outdated in the digital age, where it's easy and cheap to copy and distribute anything?

As CEO of Creative Commons, I have a very clear position: we're pro-copyright and we work within the constraints of copyright. It's a hack; we're trying within copyright to lower friction as much as possible without breaking the law or forcing people who use copyright to have to change what they do. We believe open is better. But we don't go around telling people they should give things away.

Where do you think things are heading?

Well, I do think the models we've created around ownership and copyright are outdated. I'm not sure about the idea that information is the same as a thing – so if you give it away, you don't have it anymore. A banana is worth a dollar, you give it away and you don't have it anymore. But that's a very simplistic view of the way in which the information economy works. It's never worked that way before. If you are an academic, your value increases every time someone references one of your papers. If you charged a dollar for everyone to cite your paper, that would increase the friction involved in that transaction. And which would you rather? That you get paid or that everyone cites your work? It's obvious.

If you're a musician and a DJ had to pay a dollar every time he wanted to tell someone he liked your music, would that be a good business model? Of course not. There's a tremendous amount of value in getting attention and being cited.

You have to make a decision: is it more valuable for me to get cited or to create a barrier to access and get paid? If you're Madonna and everyone knows who you are and wants your music, then you probably favour strict copyright. But if no one's ever heard of you and some people are happy to cite you but don't really want to pay, then a Creative Commons licence probably makes sense.

We have six different licences with a variety of different restrictions. For example, you can restrict free sharing to non-commerical use – a lot of professional photographers and musicians do that, so they can make money from commercial users, but allow fans to use their work for free. There are ways to preserve the business model. We're not against making money

You have invested in some great start-ups. What trends do you see emerging on the web?

The growth of venture capitalism in New York and London is interesting. Silicon Valley doesn't really get cool. Compare products and websites developed in those places. Steve Jobs [at Apple] is one of the few design-oriented people in Silicon Valley, which is why he's been able to push things forward. As we start moving up the stack, and ask how we bring museums online, how we fund music, how we make art projects, it's very difficult to find people in Silicon Valley who understand those ideas and that sensibility. A lot of innovation is shifting to New York and London.

The guys who created open-source software and sites such as Google – they understood the problem and they also understood the tools they needed to solve it. It was easy for them to create these new technologies. The problem for journalists, artists, curators and scientists is that they don't know how to hack the internet. But software development is getting easier and easier. An artist or scientist could knock out a website in a weekend now. These people for whom the internet was a black box – that will change and then we'll see a lot more innovation.

Why are you now based in Dubai?

The Middle East is underdeveloped in many ways, but there's a lot of money, even if it's not well distributed. And with 9/11, a lot of talent is moving back there. Just look at Beirut. It takes a while for an ecosystem to kick in, but it will and the trick for venture capitalists is that you've got to be there before it happens.