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We live in a world where many people (lawyers, mainly) are gainfully employed in the business of protecting ideas and the distribution of ideas around the world. These protections, mainly trademarks, copyrights and patents, form a huge body of law known as Intellectual Property or IP. The concept is that if you come up with an idea, you can protect it from rivals, thereby giving you a chance to profit from it. Protecting your idea means that you can recoup the (often sizable) investment that you might spend on bringing that idea to fruition. Without IP, the fear is that others would steal your great ideas without putting in the hard work and you would think twice about coming up with an idea ever again. Innovation would be stifled and progress as we know it would come to a grinding halt. 

Such fear is often a load of bollocks.

In fact, there is plenty of evidence to suggest that the contrary argument is in fact the case. IP often does more to strangle innovation than it does to protect it, and in a world where everyone is talking about innovation as the key ingredient of success in the 21st Century, that’s a problem.  

Silicon Valley is probably a case in point: although there are plenty of lawyers making a tidy sum from IP issues around the Bay Area, nevertheless it’s acknowledged that protecting ideas is not that big of a deal. You join another company with my ideas today, I hire you back with their ideas tomorrow . That’s pretty much the way it goes. Things move far too fast to be worrying about court cases. The Valley’s success, it has been argued, is precisely because there is much freer movement of ideas there than elsewhere in the world.

There are now companies that exist purely to buy and hoard patents: this is a complete abuse of patent law and hugely damaging to companies that want to try new things. Patent law is so often the last refuge of the uncompetitive.

Copyright, in the digital world, is a nonsense. Digital products copy themselves easily. That’s their nature. That’s what they do. Attempts to limit this ability piss off customers and positively entice people to pursue alternatives. Even when ideas and products are shared freely it is still possible to make money. Just ask Google.

Even the world “Intellectual Property” is a bit of a misnomer in the digital world. Property implies zero sum: if I have it, you don’t. It implies constrained supply – there’s only so much to go around. But the “problem” with digital (and with ideas, generally) is that it’s unconstrained. It’s infinite. You can have as much of it as you wish, with no fears that it will run out any time soon. I give you one, I still have mine. That’s the beauty of ideas.

Today’s IP situation is a lot like the world before free trade, when countries used to impose stringent tariffs on imports to protect their native industries. Unfortunately, however, such logic hampered trade and kept people poor (because tariffs worked in reverse). It was only when protectionism was eliminated within market blocs that economies began thrive.

Reducing or even eliminating IP in certain areas would have a similar, if not even greater effect on competition and innovation. I foresee a time when IP in its current form will be dead and people will shake their heads at the lunacy and lack of vision in our era. Hopefully I’ll still be around to see it happen.

 

Digital products

 

This weekend I will be taking a trip up to Dublin to accept an award for my master’s thesis. I’m looking forward to it, but it strikes me that I have never mentioned much about it in this blog. So here’s the basic idea. 

We live in a world of physical supply chains. If you want a product, a whole load of people are involved in making sure that it is available when you come in to a shop to get it. Some months or even years ago, people had to mine or harvest all the components or ingredients. Other people worked in factories to refine it, mill it or make it. Yet more people drove the stuff around to different locations. Presumably there was a place where final assembly was required. Then the products were stored in warehouses and finally distributors and retailers got involved to that it could be bought by you.  Lots of people. Lots of complexity. Lots of cost. Lots of things that could possibly go wrong. 

But some products – digital products – don’t seem to require this complexity. They have these unique, almost magical qualities that physical products don’t have. They can replicate themselves perfectly and with ease (i.e. copy / paste). The production of an additional copies does not require any new materials – there’s no resource drag. Digital products move around the internet for free and at high speed. This means that in the world of digital products there is no need for purchasing, manufacturing, transportation, assembly or any of the other related functions needed to support physical products. 

There are a number of different approaches to manage digital supply chains. First of all, there is the “pseudo physical” approach where people treat digital products as if they were physical. They limit distribution through DRM or copy-protection. They apply restrictive licensing. They threaten dire consequences against incorrect usage. They run complex processes to distribute keys to authorised individuals. It’s complex and messy. Customers get frustrated by them. Lawyers love them and given the recent history of the music business, this strategy is being forced into a long, painful retreat as file-sharing and peer-to-peer networking becomes more commonplace. 

The opposite side of the argument is super-abundance: a digital product, by its nature, cannot be controlled. Once it’s out there, it’s wild – downloadable by anyone. What I discovered was that companies are adapting to this. They still make money by wrapping their digital products into physical supply chains; by customising them so that they can’t easily be used by other people even if they were free to download; by using them to complement other (paid) services; and by using advertising based models. 

Digital products represent a big opportunity for companies, because all the infrastructure necessary to duplicate and distribute them is increasingly tending towards zero. The downside is that the price of digital products is also being forced towards zero, so sellers of digital products need to radically rethink how they organise their supply chains if they want to make money for themselves. 

And that, in a nutshell, is my thesis. Clear as mud?

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