Yesterday Facebook and the FTC came to an agreement on privacy settings. This will require Facebook to undergo privacy audits twice a year by a third party firm. In Europe Facebook users are already able to download their data as I mentioned in a previous post. I think we're living in an age where users will need to be well educated on the impact of the privacy policies of websites on the users personal data. However, how can we do this? I personally never look at the privacy policy on a website. Why? Because I don't really trust them. Effectively, just by going to the website I agree to these policies and effectively whatever is stated in the privacy information I'm bound to. However, I have to go to the website before I can read it, thus creating a catch-22.
If I did disagree with something written in the privacy policy, I've already agreed to accept their terms and if they said "we're going to steal all your cookies and sell them for profit" and I object to that it's too late. They already did it.
This puts us users in a bind. We enjoy the benefits of cookies. We don't have to always remember our passwords, we automatically get logged into our favorite websites. Personal settings pop up as soon as we log in. There are plenty of benefits from using cookies. We lose all of these as soon as we use services like Incognito from Google Chrome. Some of my readers have commented that they have switched to using an Incognito window, but it's much more of a pain to log into Facebook and they have actually started using the service less. In terms of Facebook to compensate I use TweetDeck which pulls my news feed from both twitter and Facebook. However, it doesn't get everything including messages from friends, which is annoying, but not the end of the world.
To deal with these privacy issues, the EU is proposing a pan-European standard for privacy policies that a website has to get approved. Companies like Facebook are actively fighting against this rule. I think that this is a great step. I know a lot of people don't like new government regulations. However, in this case the public is woefully uninformed and find getting informed on these topics cumbersome. A lot of money is being made off of people's ignorance. Now, many people would say that's their fault for not properly investigating this topic.
There are a few resources out there to help with getting a better understanding of how to protect yourself. The EFF has an entire section of their website devoted to privacy issues. The ACLU has a Technology and Liberty section which includes topics like privacy.
So why should we care about this? If you aren't doing anything wrong you don't have anything to worry about. I'm sorry, but this is a really naive way of looking at privacy issues. Some of you readers out there have fences in your back yard. Many of them are called privacy fences, if you aren't doing anything wrong why do you have a fence? Others will have a safe to store valuables and important documents, why do you need a safe, if you aren't doing anything wrong you shouldn't need a safe.
Putting this into a physical context highlights the absurdity of the not doing anything wrong argument. It also highlights the differences between privacy in the physical world and in the digital world. It's really easy to understand how to increase your privacy at home build a fence, better curtains better locks, bars on your windows etc.. Fixing privacy on your computer is much more difficult. Security experts have tried to make things as simple as possible by using names like Virus scanner, Firewall etc. Most people don't really know how to use these properly.
Adding a Firewall to your computer can make using it difficult and clunky. Services that you use frequently suddenly stop working correctly and it's not always obvious why at first. There needs to be a movement within security companies to make everything as simple as possible for the broader population. There should be advanced settings for the people who really want to control their data. Basically we need the firewall to turn into a fence for most people but with settings to turn it into the Berlin Wall if an advanced user wants it.
All users need to understand the risks, just like they need to understand risks of burglary, they shouldn't need to be a security expert though.
Other potential resources (I have no idea if they are any good, I just searched for privacy resources)
http://www.privacyresources.org/
http://epic.org/privacy/privacy_resources_faq.html
https://www.privacyinternational.org/article/ephr-privacy-resources
Wednesday, November 30, 2011
Friday, November 25, 2011
AT&T deal is most likely dead
We all should be extremely happy that this deal failed. Even those that don't live in the US. Two major US agencies were investigating the eventual impact of a merger between AT&T and T-Mobile. From a consumer point of view what would have been the impact of the merger?
Well, there could be benefits, for instance T-Mobile users will get access to a much larger network. They will have higher quality signal connection in more cities and in more areas through out the US. T-mobile has one of the smaller network area coverage of the 4 remaining cellphone providers in the US. (Verizon, AT&T, Sprint, T-Mobile). AT&T users may get some relief in large cities like San Francisco and New York. It is likely that the combination of the two companies' networks will increase the total capacity in a given city.
AT&T and T-Mobile claim that not only will these things be better for the customers of both providers but there will also be an increase in investment in the network. However it really doesn't seem to be the case. Based on their own documents they show that it would actually reduce the yearly investment in the cell networks for the new network overall, reduce the number of employees and likely increase the prices of cell service.
Why is this expected? Well, if the networks are combined there will likely be a reduced need for RF Engineers. These guys are effectively the "Can you hear me know guy" from Verizon commercials. They both design the interaction between the cell sites and look into where the coverage, how much capacity there is for calls/text/data in a given area and if there will be dead spots within their expected coverage area. If a group of engineers for both T-Mobile can cover all of NYC and there's a group at AT&T to cover the same area, well some of them will have to go.
What about the investment though? Well, if capacity suddenly increases in areas that are cramped for capacity, then there will be less investment. Additionally, if there is excess capacity in areas that don't have the growth potential for fully meeting that capacity the new merged company would be stupid not to redeploy those areas that have less capacity. This means that AT&T could potentially go a few years without actually buying new equipment to meet capacity demands.
Why would prices go up? I wrote an article about how monopolies at the Urban Times. Effectively, when there are not pressures driving a company to lower prices to attract more customers prices will rise or stay the same. Which will be significantly higher than the costs of the company. With only two other competitors, which most people assume Verizon would buy Sprint, there is little pressure to innovate and keep prices low. Additional the cost of switching keep prices higher too.
Because of these reasons it's a very good thing that the US government stepped in to prevent this merger. It also indicates that the government is still willing to step in and act in the best interest of the people. In fact, the collapse of this merger could be a good thing for T-Mobile users as the company will get a settlement of $4 Billion. This should be invested in their network and will increase their ability to compete. Another reason we should be happy for this collapse, is that T-Mobile is a very innovative company in terms of adoption of new types of cell phones. T-Mobile has also had excellent customer service compared to the other cell phone providers.
Well, there could be benefits, for instance T-Mobile users will get access to a much larger network. They will have higher quality signal connection in more cities and in more areas through out the US. T-mobile has one of the smaller network area coverage of the 4 remaining cellphone providers in the US. (Verizon, AT&T, Sprint, T-Mobile). AT&T users may get some relief in large cities like San Francisco and New York. It is likely that the combination of the two companies' networks will increase the total capacity in a given city.
AT&T and T-Mobile claim that not only will these things be better for the customers of both providers but there will also be an increase in investment in the network. However it really doesn't seem to be the case. Based on their own documents they show that it would actually reduce the yearly investment in the cell networks for the new network overall, reduce the number of employees and likely increase the prices of cell service.
Why is this expected? Well, if the networks are combined there will likely be a reduced need for RF Engineers. These guys are effectively the "Can you hear me know guy" from Verizon commercials. They both design the interaction between the cell sites and look into where the coverage, how much capacity there is for calls/text/data in a given area and if there will be dead spots within their expected coverage area. If a group of engineers for both T-Mobile can cover all of NYC and there's a group at AT&T to cover the same area, well some of them will have to go.
What about the investment though? Well, if capacity suddenly increases in areas that are cramped for capacity, then there will be less investment. Additionally, if there is excess capacity in areas that don't have the growth potential for fully meeting that capacity the new merged company would be stupid not to redeploy those areas that have less capacity. This means that AT&T could potentially go a few years without actually buying new equipment to meet capacity demands.
Why would prices go up? I wrote an article about how monopolies at the Urban Times. Effectively, when there are not pressures driving a company to lower prices to attract more customers prices will rise or stay the same. Which will be significantly higher than the costs of the company. With only two other competitors, which most people assume Verizon would buy Sprint, there is little pressure to innovate and keep prices low. Additional the cost of switching keep prices higher too.
Because of these reasons it's a very good thing that the US government stepped in to prevent this merger. It also indicates that the government is still willing to step in and act in the best interest of the people. In fact, the collapse of this merger could be a good thing for T-Mobile users as the company will get a settlement of $4 Billion. This should be invested in their network and will increase their ability to compete. Another reason we should be happy for this collapse, is that T-Mobile is a very innovative company in terms of adoption of new types of cell phones. T-Mobile has also had excellent customer service compared to the other cell phone providers.
Thursday, November 24, 2011
Today's post is on the Urban Times
http://www.theurbn.com/2011/11/choices-in-pursuing-innovation/
This article is about using a strong understanding of the technology base of a firm to determine where the best chances of success in a new technology are. It discusses the Innovator's Dilemma, Dynamic Capabilities and Technological adjacencies. All three of these ideas are critical for firms to understand movement into a new market.
This article is about using a strong understanding of the technology base of a firm to determine where the best chances of success in a new technology are. It discusses the Innovator's Dilemma, Dynamic Capabilities and Technological adjacencies. All three of these ideas are critical for firms to understand movement into a new market.
Wednesday, November 23, 2011
Economics, Philosophy and Science
However, it's important to understand what we're protesting and why. It was clear from the beginning of the OWS movement that most of the people didn't really understand what they were protesting. Very broad general things like Wall Street making too much money or the fact that no one has gone to jail. I think it's important that for protesting to be effective the leaders and a majority of the protesters need to be well educated on what it is exactly they are protesting.
In this case the protesters needed to be educated on economics and philosophy/morality. Why economics, those guys are like the bad guys man? Well, sadly, to have an actual conversation with these people you need to speak their language. You don't have to actually accept their assumptions as true or accurate, but you need to be well educated on the topics. Additionally, if you are well educated on economics, you'll know there are different capitalist perspectives on economics that indicate that a more equal society is a safer and happier society. Using evolutionary economics, policies can be crafted to help protect economies from crashes. In addition, being educated in slightly beyond the basic supply demand curve, it will help prevent the wool from being pulled over our eyes. This will also allow more members of our society to enter public discourse and understand and speak intelligently about the topics that impact all of us. People will actually understand what socialism and communism actually mean.
In addition to a good economic ground work, we also need to understand some basic philosophy. People are accused of moral relativism, we need to know what it actually means (morality is flexible based on the situation) and how that impacts people's actions. We also need to know when our leaders are behaving morally, immorally and what sort of freedoms we should be giving to people. Our country is founded on the philosophical ideas of the enlightenment. The US government was founded on rights, which all people should have regardless of sex, race or whatever. This includes speech and protest. If these are within our rights, then we need to protect them from people that believe it is their right to physically assault you when you exercise your rights. Morality and ethics can also drive our legislature to define laws based on humanist principles to ensure living wages and the right to live for all people. Or at least the need to create the social mobility claim to have in our society. Decreasing costs of education reduces the initial burden after school which allows people to take more risks, which may allow them to move from one social strata to the next. These should be done for moral reasons and because education and research has been shown both neoclassical economics and evolutionary economics to be a huge driver of sustained economic growth.
We also need a strong scientific foundation, which will provide a healthy dose of skepticism for government and data published by any group on either side. It gives the tools to decide if we should accept these data or open our tool box and figure out where the flaw in the data is. Science is the driver of current economic growth. It is what allows the next big break through at the platform level. We've had several platforms, coal, steel, rail, and we're currently on the silicon platform/computing platform. To develop new platforms we need to continue to drive to the frontier of science.
Our founding fathers embodied these ideals. Jefferson was a philosopher that wrote his own version of the bible. He and Franklin were both accomplished scientists. All of them believed in the rights of the people that exist not because they are given to them by the government, but because they are natural rights all people have. It is important that we acknowledge these rights and make sure we are educated in these topics to ensure an actual debate over the problems we're facing as a society. Without being educated in the importance of these topics we'll begin to argue based on the best sound byte and not on the content of the message.
In closing, all people need to become literate in these topics to provide the best foundation for an argument. Without being able to speak the right language, you'll sound like whining children that's wondering like a child lost in the woods, or out of your element if you will. With these tools, anyone can talk coherently and powerfully against the very things our own government protests in other countries.
Monday, November 21, 2011
Feds need warrant to get phone data
In a victory for cell phone users everywhere, A court says that the feds need a warrant to request phone data which includes location. We should be celebrating this victory even though it isn't a total victory. This case will most likely go to the US Supreme Court. The Federal government is not going to give up on this easily. Especially since there have been other rulings that have ruled in favor of warrantless mobile phone tracking. So it's still unclear what the end result of all of this will be.
Additionally, this may also have implications for some of the other tracking that the government is doing. Apparently, the governments don't need a warrant to install GPS tracking devices onto cars. Which the police argue saves tax payers money. It raises serious privacy concerns though. What is the limit to the number of people the police can track at a time? Can they simply track anyone closely related to a crime even if they have nothing to do with any sort of crime? With polices officers required to track individuals this puts an obvious limit on the number of people the police and other law enforcement agencies can track. They are limited to the usefulness of the tracking and the number of officers they have available to track. With the GPS tracking they have the ability to simultaneously, continuously track any individual associated with a crime or a suspect of a case. This gives them a huge amount of data on people that may not have done anything illegal and shouldn't be tracked in the first place.
With this data agencies are able to construct a network of frequent activities for the prime suspect and any other people they consider interesting. If these suspects go to a known drug hide out it can implement additional people in a crime that wouldn't have been obvious without the tracking. It could allow for an increased ability to crack down on crime. However, it can also send up a great deal of false positives and implement innocents.
Should we be concerned with this type of tracking? Definitely. The purpose of requiring a warrant, in a historical context, is to prevent the government for arbitrarily searching the house of a person. I find the ability to be remotely tracked terrifying. Just because I don't have any thing to worry about doesn't mean I'd want the government to have the ability to track me on a whim. I feel it's important for there to be a check on the law enforcement. I think it's clear from the UC Davis pepper spray incident that there's a sense of unlimited power within many of our police forces. Warrantless tracking through cell phones or vehicles are incredibly similar.
The job of the court and our constitution is to protect the people from the excesses of the government through the actions of law enforcement. We need to work with our legislation to push for laws to address these issues if the courts don't make the action in the manner to protect the fourth amendment and our privacy.
Additionally, this may also have implications for some of the other tracking that the government is doing. Apparently, the governments don't need a warrant to install GPS tracking devices onto cars. Which the police argue saves tax payers money. It raises serious privacy concerns though. What is the limit to the number of people the police can track at a time? Can they simply track anyone closely related to a crime even if they have nothing to do with any sort of crime? With polices officers required to track individuals this puts an obvious limit on the number of people the police and other law enforcement agencies can track. They are limited to the usefulness of the tracking and the number of officers they have available to track. With the GPS tracking they have the ability to simultaneously, continuously track any individual associated with a crime or a suspect of a case. This gives them a huge amount of data on people that may not have done anything illegal and shouldn't be tracked in the first place.
With this data agencies are able to construct a network of frequent activities for the prime suspect and any other people they consider interesting. If these suspects go to a known drug hide out it can implement additional people in a crime that wouldn't have been obvious without the tracking. It could allow for an increased ability to crack down on crime. However, it can also send up a great deal of false positives and implement innocents.
Should we be concerned with this type of tracking? Definitely. The purpose of requiring a warrant, in a historical context, is to prevent the government for arbitrarily searching the house of a person. I find the ability to be remotely tracked terrifying. Just because I don't have any thing to worry about doesn't mean I'd want the government to have the ability to track me on a whim. I feel it's important for there to be a check on the law enforcement. I think it's clear from the UC Davis pepper spray incident that there's a sense of unlimited power within many of our police forces. Warrantless tracking through cell phones or vehicles are incredibly similar.
The job of the court and our constitution is to protect the people from the excesses of the government through the actions of law enforcement. We need to work with our legislation to push for laws to address these issues if the courts don't make the action in the manner to protect the fourth amendment and our privacy.
Friday, November 18, 2011
Innovation and government regulation
Yesterday during a short twitter discussion the topic of US governmental policies killing new business starts came up. With the 140 characters I wasn't able to property address the issue that was raised. It is extremely clear that SOPA is an innovation killer, because it effectively requires everyone to have a copyright lawyer on staff at the start of any sort of web company. If you have pictures, video, commentary or whatever on your site you'll possibly be the target of some copyright holder. This policy isn't in place and appears, for the moment, to be killed. I expect this law to be resurrected in a year or so. Despite the face that the EU adopted a resolution against SOPA.
Let's look beyond SOPA though, what other policies are in place that seem to prevent job growth? One of the biggest ones right now is tax levels for people making $250,000 or more. Politifact did an analysis of Congressman Boehner's claim that taxing millionaires hurts small businesses and prevents hiring. They found this statement to be False. Of course this does depend on the definition of a small business, which Politifact expresses is difficult to define. One metric that I'm aware of is based off the annual sales, where sales over $500,000/year moves you out of the small business area. This may not be the best amount, but let's say your company has sales of $3,000,000 a year and has enough profit to pay you $1,000,000 of that a year. This tells me that you aren't reinvesting and trying to continue to grow your firm, probably aren't paying your employees very well. Additionally, at this amount of sales it is likely that as an entrepreneur you've had to get capital investment in one of several ways, loans or from venture capital. A bank wouldn't care if you were getting paid a million a year, but there's no way a VC would allow you to pay yourself that if they weren't getting a good size chunk of money too and you were still planning on reinvesting in the future enough to get a huge IPO. Now, if you've built this company from the ground up to this level on your own, then you aren't paying yourself that kind of money. You would have to be re-investing that money back into the firm to get new equipment hiring the best people, etc.
Another way for companies to get started is through spin-off from another company, bootstrapping themselves to get going or spinning-out of a university. I have an article that will come out soon in the Urban times that addresses some policies that can help with the creation of Spin-outs and start-ups. In the US, we still have the best policies for this. The EU as a collective and European countries are modeling many of their intellectual property laws and funding methods off of US policies. A few examples are a very similar law to the Dole-Bayh law from the 80's to allow universities to own IP and to give it to their employees if they wish. The creation of technology incubators - this was a truly American innovation, innovation prize contests and national seed funds. The continual reinvention of these policies in the US allows us to create more new companies than European counterparts from a variety of sources.
Are there other policies that hurt the creation of companies? Yes, sure. I'm sure there are some pollution regulations that negatively impact the survival rate of firms. However, from a purely economic perspective this regulation is forcing the company to internalize the cost of the negative externality. Which the company should innovate to reduce the amount of pollution they are creating or buy equipment that reduces their costs in other ways. Innovation to reduce pollution should reduce the cost of raw materials, because they are being used more efficiently and in lower quantities. Every company wants to be able to reduce the amount of raw materials they use. In the next few years we will see greener companies, not because they have a desire to be sustainable, but because it's more profitable. The regulations the EPA puts into place requires companies to internalize negative externalities, which from both a evolutionary and neo-classical economic perspective is expected from the market and when the market fails then and only then the government needs to step in.
There will be regulations that are industry specific that may slow the amount of innovation and creation of firms, but some of that is surely death by a thousand paper cuts (too much paper work) and the inability to figure out a way to acquire enough funds to get the company going. Compared to European countries the US is the leader for ease of firm creation and the EU is still playing catch up in that regard.
Let's look beyond SOPA though, what other policies are in place that seem to prevent job growth? One of the biggest ones right now is tax levels for people making $250,000 or more. Politifact did an analysis of Congressman Boehner's claim that taxing millionaires hurts small businesses and prevents hiring. They found this statement to be False. Of course this does depend on the definition of a small business, which Politifact expresses is difficult to define. One metric that I'm aware of is based off the annual sales, where sales over $500,000/year moves you out of the small business area. This may not be the best amount, but let's say your company has sales of $3,000,000 a year and has enough profit to pay you $1,000,000 of that a year. This tells me that you aren't reinvesting and trying to continue to grow your firm, probably aren't paying your employees very well. Additionally, at this amount of sales it is likely that as an entrepreneur you've had to get capital investment in one of several ways, loans or from venture capital. A bank wouldn't care if you were getting paid a million a year, but there's no way a VC would allow you to pay yourself that if they weren't getting a good size chunk of money too and you were still planning on reinvesting in the future enough to get a huge IPO. Now, if you've built this company from the ground up to this level on your own, then you aren't paying yourself that kind of money. You would have to be re-investing that money back into the firm to get new equipment hiring the best people, etc.
Another way for companies to get started is through spin-off from another company, bootstrapping themselves to get going or spinning-out of a university. I have an article that will come out soon in the Urban times that addresses some policies that can help with the creation of Spin-outs and start-ups. In the US, we still have the best policies for this. The EU as a collective and European countries are modeling many of their intellectual property laws and funding methods off of US policies. A few examples are a very similar law to the Dole-Bayh law from the 80's to allow universities to own IP and to give it to their employees if they wish. The creation of technology incubators - this was a truly American innovation, innovation prize contests and national seed funds. The continual reinvention of these policies in the US allows us to create more new companies than European counterparts from a variety of sources.
Are there other policies that hurt the creation of companies? Yes, sure. I'm sure there are some pollution regulations that negatively impact the survival rate of firms. However, from a purely economic perspective this regulation is forcing the company to internalize the cost of the negative externality. Which the company should innovate to reduce the amount of pollution they are creating or buy equipment that reduces their costs in other ways. Innovation to reduce pollution should reduce the cost of raw materials, because they are being used more efficiently and in lower quantities. Every company wants to be able to reduce the amount of raw materials they use. In the next few years we will see greener companies, not because they have a desire to be sustainable, but because it's more profitable. The regulations the EPA puts into place requires companies to internalize negative externalities, which from both a evolutionary and neo-classical economic perspective is expected from the market and when the market fails then and only then the government needs to step in.
There will be regulations that are industry specific that may slow the amount of innovation and creation of firms, but some of that is surely death by a thousand paper cuts (too much paper work) and the inability to figure out a way to acquire enough funds to get the company going. Compared to European countries the US is the leader for ease of firm creation and the EU is still playing catch up in that regard.
Thursday, November 17, 2011
Wednesday, November 16, 2011
Biggest threat to internet innovation
Regardless where you live, the largest threat to the internet is the US Congress/Department of Justice and close second may be the UK court system. In this post i'm going to focus on the US congress and DOJ because what they are doing is fairly ridiculous. The US Congress is currently considering a bill called Stop Online Piracy Act or SOPA, critics like to call it the E-parasite act. This act, according to various sources, this bill amounts to online black-listing. It's also being called the Great FireWall of America. This is a complete disaster in my opinion. The internet is one of the fastest growing parts of our economy. Anyone can start up a web based company. It doesn't have to be anything fancy at first, but over time you'll get more sophisticated.
The EFF notes three extremely popular sites that are in the cross hair of SOPA. Etsy, because there are simply too many little shops that could be selling illegal material. For instance, the US Supreme Court Ruled that you couldn't resell AutoCAD, the likelihood of that happening might be low, but what about a screen printed shirt with some band logo? That's just as illegal. Another site is Flickr, which is pretty obvious because it's so easy to claim a picture as your own. The last they mention is Vimeo for the same reasons. I would also expect YouTube to be on that list as well.
So aside from a black list what does the actual bill do? What legal censorship isn't enough for you to be outraged against this bill? I mean we're talking about Turkey and Pakistan level of censorship of sites here. It's not unrealistic to expect facebook and Google to get black listed with this law. Facebook could get hit if some one quotes stuff illegally or posts video with copyrighted material on it. Since you're able to post and stream through facebook, it might raise some questions over copyright.Google of course links to a huge amount of copyright material that a user can get illicitly.
Ok, what else is there you really want to know? The rights holders can request payment processing companies (read Visa, Mastercard and ad companies) to block payments to your site. For some people that will mean no more YouTube money, for others it will be a death sentence. Does the court get involved with any of this? Nope. The companies have 5 days to respond to a payment stop. Which means even if you are in the clear, if a request happens, you likely won't get paid. Check the EFF's break down for more details.
But this is 'Merica! Surely something like this won't happen. They'll take our jerbs! Yes, they could in fact take away your jobs. Is anyone fighting against this? Yep. Google, Facebook, Zynga, Twitter, Michelle Bachmann (Yes the crazy lady), Ron Paul (Yes the crazy in a different way guy) and a small list of Congress members from both sides of the aisle are banding together to try to kill the bill. They are arguing that the bill is too broad and doesn't appropriately address the problem is trying to "fix."
What do most Americans feel about copyright legal action? As a whole they are against it. In fact most only think that a small fine of a maximum of $100 is appropriate for a downloaded song. Many have indicated that as more legal alternatives have appeared users have been less likely to use the illegal versions. Of course this is self reported data so it could be skewed, but even if you add 10 points it's still showing that legal alternatives are best deterrent for illegal downloading.
You can email your representatives here. I strongly suggest you do. The more voices that speak out in protest the more likely at least a few people will hear. Personally, I don't think the US government should even be talking about copyright right now. They need to be working on jobs.
The EFF notes three extremely popular sites that are in the cross hair of SOPA. Etsy, because there are simply too many little shops that could be selling illegal material. For instance, the US Supreme Court Ruled that you couldn't resell AutoCAD, the likelihood of that happening might be low, but what about a screen printed shirt with some band logo? That's just as illegal. Another site is Flickr, which is pretty obvious because it's so easy to claim a picture as your own. The last they mention is Vimeo for the same reasons. I would also expect YouTube to be on that list as well.
So aside from a black list what does the actual bill do? What legal censorship isn't enough for you to be outraged against this bill? I mean we're talking about Turkey and Pakistan level of censorship of sites here. It's not unrealistic to expect facebook and Google to get black listed with this law. Facebook could get hit if some one quotes stuff illegally or posts video with copyrighted material on it. Since you're able to post and stream through facebook, it might raise some questions over copyright.Google of course links to a huge amount of copyright material that a user can get illicitly.
Ok, what else is there you really want to know? The rights holders can request payment processing companies (read Visa, Mastercard and ad companies) to block payments to your site. For some people that will mean no more YouTube money, for others it will be a death sentence. Does the court get involved with any of this? Nope. The companies have 5 days to respond to a payment stop. Which means even if you are in the clear, if a request happens, you likely won't get paid. Check the EFF's break down for more details.
But this is 'Merica! Surely something like this won't happen. They'll take our jerbs! Yes, they could in fact take away your jobs. Is anyone fighting against this? Yep. Google, Facebook, Zynga, Twitter, Michelle Bachmann (Yes the crazy lady), Ron Paul (Yes the crazy in a different way guy) and a small list of Congress members from both sides of the aisle are banding together to try to kill the bill. They are arguing that the bill is too broad and doesn't appropriately address the problem is trying to "fix."
What do most Americans feel about copyright legal action? As a whole they are against it. In fact most only think that a small fine of a maximum of $100 is appropriate for a downloaded song. Many have indicated that as more legal alternatives have appeared users have been less likely to use the illegal versions. Of course this is self reported data so it could be skewed, but even if you add 10 points it's still showing that legal alternatives are best deterrent for illegal downloading.
You can email your representatives here. I strongly suggest you do. The more voices that speak out in protest the more likely at least a few people will hear. Personally, I don't think the US government should even be talking about copyright right now. They need to be working on jobs.
Monday, November 14, 2011
Review: Republic Lost. Or the hand book for OWS
I just finished Republic Lost by Lawrence Lessig last night. If it's not obvious by now, I'm a big Lessig fan. I find his work extremely interesting and relevant to the changing world. It is a bit dry to be honest, all of his writings deal with how society, the market and laws interact.
In my opinion this book should be the handbook for anyone interested in the Occupy movement. I'll explain why in a few steps. First, he mentions various different cases of inequity which are highly promenient in the US. He specifically addresses the 99% argument and does it a great deal of good. He fully explains what it means to be in the 99% in a way that has been missing in the dialogue. He actually says that the 1% isn't the biggest problem it's actually a much smaller percentage, but the 1% can cause a lot of damage as well.
In the book he systematically explains how and why money is a problem in the system. In many cases it's not that there is quid pro quo corruption going on. More that it seems like there is corruption going on because of the money involved. As an outsider it's hard to trust a system where the Teachers union (or wall street or exxon) can say I will give $1 million dollars to any candidate that supports tenure (or bail outs or deep water drilling). This is an implicit threat because if you don't support these topics your opponent will, because it will give them campaign donations. As donations play a huge amount of time for a congressman (30-70%) anything that makes it easier to get money the congressmen will campaign to support.
There have been studies that question if these gifts actively change legislative voting behavior, but many quotes from former congressmen explaining that there is a sense of obligation to the donor. This isn't a tit for tat type exchange, Lessig argues it's more of a gift economy. Like what buy a round of beers for your friends, you don't want money for it, you want them to buy you the next round. The fact that you bought instills (in most people) a sense of obligation to buy the next round. This analogue is perfect in fact, as Lessig argues that congress is dependent on these funds like an alcoholic. This is an illicit dependency as he shows that Congress should be "dependent on the People alone."
Lessig builds an extremely will supported case that donations impact the legislative process by impacting what congressional leaders allow debate on. Even if it doesn't impact votes, it impacts what is considered important by the congress. This is one of the ways that congress seems out of touch with regular people. I believe Lessig builds a strong enough case to demonstrate that something must be done. He actually has a few suggestions on how to deal with the problem.
The first is the old fashioned way of trying to build support through congress to enact real campaign reform. Lessig doesn't believe this is realistic and gives it about a 0% chance of success. His next idea is to get about 300 well known people to run as super candidate to force the issues. Have these people run in multiple different districts (it's legal) and garner enough attention to force the politicians to say they will vote for reform. Do this in enough state and in the right states and it might work. He calls this a kind of political terrorism. He gives it a 5% chance of working once you get started.
His next idea is to have one of those types candidates run for the of president making the promise to hold congress hostage until the reforms are made, BUT resign as soon as the reforms are completed. He argues that this is required for people to honestly believe that the changes would happen and for congress to actually enact the changes. There would be no negotiations other than making sure all the normal people get paid and services don't impact most business. He also gives this one a 5% chance of working.
The final suggestion is to push for a constitutional convention. This would require 38/50 states to OK the convention. He, at length, describes all the potential problems and legal issues with the convention, which matter once the ball gets rolling. In addition to this he suggests creating about 300 shadow conventions where regular people are given the opportunity to make constitutional amendments. These could then be the basis for what is sent to congress.
In total, if you are part of the OWS movement you need to read this book. It will help give more firepower for your arguments against the 1% and it will give some guidance on what the first priority should be. I agree with Lessig that until we get money out of the system no other reforms are possible. We will not have a function government until the People are the only thing the government relies on for choices of legislature.
In my opinion this book should be the handbook for anyone interested in the Occupy movement. I'll explain why in a few steps. First, he mentions various different cases of inequity which are highly promenient in the US. He specifically addresses the 99% argument and does it a great deal of good. He fully explains what it means to be in the 99% in a way that has been missing in the dialogue. He actually says that the 1% isn't the biggest problem it's actually a much smaller percentage, but the 1% can cause a lot of damage as well.
In the book he systematically explains how and why money is a problem in the system. In many cases it's not that there is quid pro quo corruption going on. More that it seems like there is corruption going on because of the money involved. As an outsider it's hard to trust a system where the Teachers union (or wall street or exxon) can say I will give $1 million dollars to any candidate that supports tenure (or bail outs or deep water drilling). This is an implicit threat because if you don't support these topics your opponent will, because it will give them campaign donations. As donations play a huge amount of time for a congressman (30-70%) anything that makes it easier to get money the congressmen will campaign to support.
There have been studies that question if these gifts actively change legislative voting behavior, but many quotes from former congressmen explaining that there is a sense of obligation to the donor. This isn't a tit for tat type exchange, Lessig argues it's more of a gift economy. Like what buy a round of beers for your friends, you don't want money for it, you want them to buy you the next round. The fact that you bought instills (in most people) a sense of obligation to buy the next round. This analogue is perfect in fact, as Lessig argues that congress is dependent on these funds like an alcoholic. This is an illicit dependency as he shows that Congress should be "dependent on the People alone."
Lessig builds an extremely will supported case that donations impact the legislative process by impacting what congressional leaders allow debate on. Even if it doesn't impact votes, it impacts what is considered important by the congress. This is one of the ways that congress seems out of touch with regular people. I believe Lessig builds a strong enough case to demonstrate that something must be done. He actually has a few suggestions on how to deal with the problem.
The first is the old fashioned way of trying to build support through congress to enact real campaign reform. Lessig doesn't believe this is realistic and gives it about a 0% chance of success. His next idea is to get about 300 well known people to run as super candidate to force the issues. Have these people run in multiple different districts (it's legal) and garner enough attention to force the politicians to say they will vote for reform. Do this in enough state and in the right states and it might work. He calls this a kind of political terrorism. He gives it a 5% chance of working once you get started.
His next idea is to have one of those types candidates run for the of president making the promise to hold congress hostage until the reforms are made, BUT resign as soon as the reforms are completed. He argues that this is required for people to honestly believe that the changes would happen and for congress to actually enact the changes. There would be no negotiations other than making sure all the normal people get paid and services don't impact most business. He also gives this one a 5% chance of working.
The final suggestion is to push for a constitutional convention. This would require 38/50 states to OK the convention. He, at length, describes all the potential problems and legal issues with the convention, which matter once the ball gets rolling. In addition to this he suggests creating about 300 shadow conventions where regular people are given the opportunity to make constitutional amendments. These could then be the basis for what is sent to congress.
In total, if you are part of the OWS movement you need to read this book. It will help give more firepower for your arguments against the 1% and it will give some guidance on what the first priority should be. I agree with Lessig that until we get money out of the system no other reforms are possible. We will not have a function government until the People are the only thing the government relies on for choices of legislature.
Sunday, November 13, 2011
Saturday, November 12, 2011
Router = Computer
According to the online magazine Techeye.net an ADSL modem/router is considered by a German court. The dispute is over if a user is allowed to install software that changes the ADSL modem's firewall settings. It was actually a battle between two companies, the company that makes the router and the company making software for the router. I think that this ruling has some extremely interesting implications.
First, by defining a router as a computer it opens the door for a HUGE number of devices to be defined as a computer. Most of us wouldn't think of a router as a computer. It's a switch, it has a very specific purpose of deciding which packet gets through to the network at a given time and to prevent congestion on the network. In this case, it has the additional function of pulling out the high speed data from the phone line as well. It does have a user interface, but it's typically restricted to a web browser. This is hardly something the average user would consider a computer. Which tells me something about the judge in the case - he understands technology and computing. The US and rest of Europe could use more judges like this.
Second, since a broad range of devices are now considered devices, at least in Germany, it could force companies to open up their hardware to user software manipulation. I see a few areas where I think this will cause major companies problems.
The first would be video game consoles. If a router is considered a computer there is no way that a company could argue that a video game console is not a computer. Consider the following, you are able to install software video games onto the console, you actually interact with an operating system, you are able to browse the internet and of course play games on the console. These are all things you are able to do on your PC. There are more restrictions on the console than the PC of course. Now, let's say a third party company wants to come along and create something that will allow you to increase the functionality of the software or the machine in someway. In Germany, the user should have the right to do that.
The second would be cell phones. It's pretty obvious that cellphones are computers and this ruling would just cement that. I think this will cause more problems for iOS than for Android. For two reasons, first Android already allows third party app stores onto the devices which increases the control of the end user over the computer. Second, Apple controls what software can be allowed into the app store thus controlling what a user is able to install on their computer. The German ruling basically says that a company cannot stop a user from installing software onto their computer if they want to install it. Apple and the App store are directly controlling what a user can and cannot install onto their device. I would not be surprised if this type of control is challenged in the German courts.
One other implications could be that as you own the computer user may be able to stop companies from remotely installing software onto their computer they don't want on there. For instance, in the US it's not uncommon for Verizon Wireless to push software out to specific devices without notifying you. You are giving implicit consent by using their networks. However, if the same thing happened to my PC from Comcast there would be a law suit. Since phones are in a weird quasi state of rights in the US there isn't the same sort of feelings. However, I believe as the gap between PC and phones close and the desire to control what goes on the phone and what doesn't increases there will be lawsuits over installing and deleting software from your computer.
First, by defining a router as a computer it opens the door for a HUGE number of devices to be defined as a computer. Most of us wouldn't think of a router as a computer. It's a switch, it has a very specific purpose of deciding which packet gets through to the network at a given time and to prevent congestion on the network. In this case, it has the additional function of pulling out the high speed data from the phone line as well. It does have a user interface, but it's typically restricted to a web browser. This is hardly something the average user would consider a computer. Which tells me something about the judge in the case - he understands technology and computing. The US and rest of Europe could use more judges like this.
Second, since a broad range of devices are now considered devices, at least in Germany, it could force companies to open up their hardware to user software manipulation. I see a few areas where I think this will cause major companies problems.
The first would be video game consoles. If a router is considered a computer there is no way that a company could argue that a video game console is not a computer. Consider the following, you are able to install software video games onto the console, you actually interact with an operating system, you are able to browse the internet and of course play games on the console. These are all things you are able to do on your PC. There are more restrictions on the console than the PC of course. Now, let's say a third party company wants to come along and create something that will allow you to increase the functionality of the software or the machine in someway. In Germany, the user should have the right to do that.
The second would be cell phones. It's pretty obvious that cellphones are computers and this ruling would just cement that. I think this will cause more problems for iOS than for Android. For two reasons, first Android already allows third party app stores onto the devices which increases the control of the end user over the computer. Second, Apple controls what software can be allowed into the app store thus controlling what a user is able to install on their computer. The German ruling basically says that a company cannot stop a user from installing software onto their computer if they want to install it. Apple and the App store are directly controlling what a user can and cannot install onto their device. I would not be surprised if this type of control is challenged in the German courts.
One other implications could be that as you own the computer user may be able to stop companies from remotely installing software onto their computer they don't want on there. For instance, in the US it's not uncommon for Verizon Wireless to push software out to specific devices without notifying you. You are giving implicit consent by using their networks. However, if the same thing happened to my PC from Comcast there would be a law suit. Since phones are in a weird quasi state of rights in the US there isn't the same sort of feelings. However, I believe as the gap between PC and phones close and the desire to control what goes on the phone and what doesn't increases there will be lawsuits over installing and deleting software from your computer.
Thursday, November 10, 2011
Unintended consequences of knowledge management regimes
There are several consequences of the differences between the US (and the west) and China (and other autocracies). First, with one of the major assumptions of neoclassical economics out the window, it calls into question basing economic policy on neoclassical economics. Second, with a monopoly structure for intellectual property several different economic incentives have been created. Finally, the differences in IP management between the countries creates tensions at several different levels. I'll discuss each of these points in more detail.
First, if one of the major assumptions for economic policy includes non-rival, non-exclusive knowledge, it's difficult to understand why there isn't more competition in many markets. However, as we know it's not really possible for any firm to pick up any sort of technology and start to produce a given product. Because of this difficulty regions and areas tend to become experts at specific types of technologies. However, even in the case of China the freedom of access to IP makes it easier for firms to produce specific products. The problem still lies in the fact that you still need tacit knowledge to actually make the product. A patent is supposed to give you the information you need to produce the technology. However, the actual patents are difficult to read and not likely to be possible
Second, with a monopoly structure in place for intellectual property it gives very different incentives for owners of intellectual property. First, for people who actually produce a product, attacking products that are similar for infringement can be a very lucrative proposition. It prevents other companies from becoming competition. Apple is currently using this tactic to go after Android through Samsung and HTC. With a full monopoly technological progress can actually come to a standstill. An example of this is with Xerox copiers. With the monopoly in place Xerox did not innovate and kept prices extremely high. As soon as their patent ran out the competition came in and almost took all of the market share from Xerox. They introduced lower priced products and a wider more personal product range. Without the monopoly in place other companies could try to move into the market space earlier and drive innovation from the beginning of the market. Finally, with reduced ownership of IP there will be less patent trolls like Intellectual Ventures.
Third, the IP management is causing issues between firms and the Chinese government. The firms do not want to give up their IP because it's how they are able to make their money. Some of these technologies are so easy to copy it's impossible to make a profit without protection. In theory pharmaceuticals should be perfectly copyable based on the chemical properties of the drug. If the pharmaceutical companies didn't have a chance to recoup the investment on a drug (500 million - 1 billion per drug) there would be no innovation. The differences present problems for trade and agreements between countries. The US and China have had serious disagreements over how IP should be managed.
Basically, the differences in how IP is understood impacts a countries policies economically and in trade. It is important to understand exactly what's going on with these issues. Our governments are pushing for different levels of control over IP both in patents and other forms of copyright. As some one interested in policy, it's important to understand what types of policies we should be pushing for. I don't think there's any true right answer for the IP problem. In different situations policies should be adjusted. We cannot have a stagnant IP regime when technologies are evolving as fast as they are.
First, if one of the major assumptions for economic policy includes non-rival, non-exclusive knowledge, it's difficult to understand why there isn't more competition in many markets. However, as we know it's not really possible for any firm to pick up any sort of technology and start to produce a given product. Because of this difficulty regions and areas tend to become experts at specific types of technologies. However, even in the case of China the freedom of access to IP makes it easier for firms to produce specific products. The problem still lies in the fact that you still need tacit knowledge to actually make the product. A patent is supposed to give you the information you need to produce the technology. However, the actual patents are difficult to read and not likely to be possible
Second, with a monopoly structure in place for intellectual property it gives very different incentives for owners of intellectual property. First, for people who actually produce a product, attacking products that are similar for infringement can be a very lucrative proposition. It prevents other companies from becoming competition. Apple is currently using this tactic to go after Android through Samsung and HTC. With a full monopoly technological progress can actually come to a standstill. An example of this is with Xerox copiers. With the monopoly in place Xerox did not innovate and kept prices extremely high. As soon as their patent ran out the competition came in and almost took all of the market share from Xerox. They introduced lower priced products and a wider more personal product range. Without the monopoly in place other companies could try to move into the market space earlier and drive innovation from the beginning of the market. Finally, with reduced ownership of IP there will be less patent trolls like Intellectual Ventures.
Third, the IP management is causing issues between firms and the Chinese government. The firms do not want to give up their IP because it's how they are able to make their money. Some of these technologies are so easy to copy it's impossible to make a profit without protection. In theory pharmaceuticals should be perfectly copyable based on the chemical properties of the drug. If the pharmaceutical companies didn't have a chance to recoup the investment on a drug (500 million - 1 billion per drug) there would be no innovation. The differences present problems for trade and agreements between countries. The US and China have had serious disagreements over how IP should be managed.
Basically, the differences in how IP is understood impacts a countries policies economically and in trade. It is important to understand exactly what's going on with these issues. Our governments are pushing for different levels of control over IP both in patents and other forms of copyright. As some one interested in policy, it's important to understand what types of policies we should be pushing for. I don't think there's any true right answer for the IP problem. In different situations policies should be adjusted. We cannot have a stagnant IP regime when technologies are evolving as fast as they are.
Tuesday, November 8, 2011
Are democracies or autocracies better with technology Management?
According to neoclassical economics knowledge is a non-rival (I can use it without preventing you from using it) and non-exclusive (available to everyone) resource. This has two impacts on their economic theory. First, the actual impact of research and development is excluded from economic growth and is ignored. Second, that any company should be able to pick up and produce any technology. Both of these points are relatively ridiculous. For two reasons. First, we know that research leads to the formation of new companies. Second we know that most companies cannot produce any product and many companies that produce products outside their expertise fail at it.
From a neoclassical perspective democracies are terrible at sharing knowledge and technologies. Democracies have a slew of laws that regulate access to technology form monopolies for specific technologies if they have something called a patent. Additionally, there are other contracts that can get in the way of sharing of knowledge in a way that is neoclassical. Non-disclosure agreements and non-compete clauses. If you aren't allowed to discuss a specific technology with other people, it prevents knowledge from spreading and being shared to other companies. If you aren't allowed to compete within the same industry after you leave a company, it prevents you from using that knowledge in a positive way at another firm.
These laws have been put into place in our democracies to ensure proper protection of technologies for firms. It's designed to prevent the spreading of tacit knowledge from company A to company B. As a company this is incredibly desirable. Without these protections some research would be worthless to conduct. Knowledge spill-overs would cause prices to fall to cost or lower as firms compete for market share. It's great for consumers, but bad for firms.
So what happens in China? Well according to Make it in America, China requires many firms to hand over their Intellectual Property to the Chinese state. What ends up happening after this is that the Chinese government sells the information or gives the information to one or more Chinese company. These companies tend to be made up of former employees at the company that made the product before. This allows tacit knowledge transfer to the firm and a fast ramp to compete directly with the inventor of the technology. The knowledge is freer in China than it is in the US because of this. This increases competition and may be impacting the cost of goods like solar panels.
In a way this type of behavior forces companies to compete based on the actual costs of the technology. This is what is expected in the neoclassical theory. All prices will eventually drop to the marginal cost of a product with near zero profits for the producing company. In a perverse way, this is a "freer" market than ours because it comes closer to the non-rival non-exclusive knowledge base.
In my next blog, I'll discuss this topic more.
From a neoclassical perspective democracies are terrible at sharing knowledge and technologies. Democracies have a slew of laws that regulate access to technology form monopolies for specific technologies if they have something called a patent. Additionally, there are other contracts that can get in the way of sharing of knowledge in a way that is neoclassical. Non-disclosure agreements and non-compete clauses. If you aren't allowed to discuss a specific technology with other people, it prevents knowledge from spreading and being shared to other companies. If you aren't allowed to compete within the same industry after you leave a company, it prevents you from using that knowledge in a positive way at another firm.
These laws have been put into place in our democracies to ensure proper protection of technologies for firms. It's designed to prevent the spreading of tacit knowledge from company A to company B. As a company this is incredibly desirable. Without these protections some research would be worthless to conduct. Knowledge spill-overs would cause prices to fall to cost or lower as firms compete for market share. It's great for consumers, but bad for firms.
So what happens in China? Well according to Make it in America, China requires many firms to hand over their Intellectual Property to the Chinese state. What ends up happening after this is that the Chinese government sells the information or gives the information to one or more Chinese company. These companies tend to be made up of former employees at the company that made the product before. This allows tacit knowledge transfer to the firm and a fast ramp to compete directly with the inventor of the technology. The knowledge is freer in China than it is in the US because of this. This increases competition and may be impacting the cost of goods like solar panels.
In a way this type of behavior forces companies to compete based on the actual costs of the technology. This is what is expected in the neoclassical theory. All prices will eventually drop to the marginal cost of a product with near zero profits for the producing company. In a perverse way, this is a "freer" market than ours because it comes closer to the non-rival non-exclusive knowledge base.
In my next blog, I'll discuss this topic more.
Monday, November 7, 2011
China, Technology and creativity
Sorry I've been away for so long. I've been hanging out with my Awesome wife! She gave a talk in Ireland, which I went to for most of a week. It was a good time. She then came here to Eindhoven for a week and had an interview. So that's why I haven't been updating. Sorry faithful readers.
At a party on Saturday, I got into a fairly active discussion with 4 PhDs and myself. They are all engineering PhDs, so they understand research and how technology works rather well. We got into a discussion on if China was going to actually really over take the US in scientific research. I said I think it's likely, but there were many arguments against that likelihood. I didn't really get to finish my argument on why it's possible. So, I'm going to do that now.
Basically, some of the core arguments against China being able to overtake is us lack of creativity. China is a country of followers, not a country of creative leaders. Another argument was the lack of high quality education and research centers in China. I'll address the second argument first and then discuss the first argument.
Americans know that we educated a lot of foreigners at our universities, 2008 was an all time high for the number of international students. In fact my roommate at one point explained to me that one of the groups at the University of Texas was comprised entirely of Chinese students. They conduct their meetings and research all in Chinese and, in fact, leave the US speaking worse English than when they arrived. But why are they leaving? The link above notes that there simply aren't enough H1B Visas or green cards for them all to stay. Effectively we're throwing out the people we educate. Over time enough good scientists and engineers will be sent back and will start teaching in China. China has big ambitions and has been creating universities as fast as it can. Using an evolutionary perspective, we can see that it's likely they will continue to create variation and students will be selecting the best universities. One of them is likely to start producing more science and better science than another. This will lead to the best students and best researchers going to that school. One or two could become the Chinese version of MIT, Berkeley or Harvard. I think it's clear that education won't hold them back. Eventually, they will have several universities in the top 200 list according to the Times Higher Education ranking.
The second argument is a little tricker to argue against. The Chinese aren't creative enough to create radical innovations. First, I'm sure that the Chinese I know would object to this blanket statement. However, let's assume for the moment that's it's some what correct. There's a culture that doesn't reward creativity and rewards conformity. I can think of two countries that have similar types of culture that have been creative and are excellent centers of research and innovation, Japan and South Korea. Now are they as good as the US at innovation or research, No. However, they have had some great innovations and do great research.
When it comes to patent research there's something called a Triadic patent. It's a patent that is filed in the US, Europe and Japan. Europe and Japan have higher standards for patents than the US and are more difficult to acquire. Why does this matter? Well effectively Japan is the only country in Asia that would fit better with the European countries in terms of GDP per capita, protection of IP and research.
Both South Korea and Japan have a few companies that are on the leading edge of their respective fields. Samsung is in a huge number of different areas and is the world leader in many of them. Japan has Nikon, Sony, Toyota and a few other big companies that are on the cutting edge in research, design and innovation. So, I don't accept the argument that the Chinese couldn't be creative.
Another point I was trying to make, is that over time as a country becomes the center of manufacturing and incremental innovation on a product, it's likely that they are going to be able to create the next radical innovation in that field. There are two things that support this. First, in a book by Andrew Liveris, the British CEO of Dow Chemical, there is anecdotal evidence to support bringing manufacturing back to the US along with the R&D that goes with it. The other argument is based on the research of Cesar Hidalgo of MIT that shows through network theory, that to become a leader in technology you have to build your way through a series of other technologies. It helps explain why it's so hard for countries to pick up creating semiconductors. However, as a country develops the technological capability to work within a type of technology they are likely to create innovation and changes in that technology.
China has effectively been given the ability to manufacture just about everything through outsourcing. They have the technological capabilities to build and design new technologies. China also has the resources devoted to it. They created a five year plan where they are going to invest $1.5 trillion in 7 science sectors. Because of these factors I believe that China is a real threat to US and European leadership in research and technology. For any one to dismiss China because of cultural reasons or technological capabilities is making a mistake and is likely to be surprised in 20 -30 years when China becomes a leader in at least one field, likely more than one.
At a party on Saturday, I got into a fairly active discussion with 4 PhDs and myself. They are all engineering PhDs, so they understand research and how technology works rather well. We got into a discussion on if China was going to actually really over take the US in scientific research. I said I think it's likely, but there were many arguments against that likelihood. I didn't really get to finish my argument on why it's possible. So, I'm going to do that now.
Basically, some of the core arguments against China being able to overtake is us lack of creativity. China is a country of followers, not a country of creative leaders. Another argument was the lack of high quality education and research centers in China. I'll address the second argument first and then discuss the first argument.
Americans know that we educated a lot of foreigners at our universities, 2008 was an all time high for the number of international students. In fact my roommate at one point explained to me that one of the groups at the University of Texas was comprised entirely of Chinese students. They conduct their meetings and research all in Chinese and, in fact, leave the US speaking worse English than when they arrived. But why are they leaving? The link above notes that there simply aren't enough H1B Visas or green cards for them all to stay. Effectively we're throwing out the people we educate. Over time enough good scientists and engineers will be sent back and will start teaching in China. China has big ambitions and has been creating universities as fast as it can. Using an evolutionary perspective, we can see that it's likely they will continue to create variation and students will be selecting the best universities. One of them is likely to start producing more science and better science than another. This will lead to the best students and best researchers going to that school. One or two could become the Chinese version of MIT, Berkeley or Harvard. I think it's clear that education won't hold them back. Eventually, they will have several universities in the top 200 list according to the Times Higher Education ranking.
The second argument is a little tricker to argue against. The Chinese aren't creative enough to create radical innovations. First, I'm sure that the Chinese I know would object to this blanket statement. However, let's assume for the moment that's it's some what correct. There's a culture that doesn't reward creativity and rewards conformity. I can think of two countries that have similar types of culture that have been creative and are excellent centers of research and innovation, Japan and South Korea. Now are they as good as the US at innovation or research, No. However, they have had some great innovations and do great research.
When it comes to patent research there's something called a Triadic patent. It's a patent that is filed in the US, Europe and Japan. Europe and Japan have higher standards for patents than the US and are more difficult to acquire. Why does this matter? Well effectively Japan is the only country in Asia that would fit better with the European countries in terms of GDP per capita, protection of IP and research.
Both South Korea and Japan have a few companies that are on the leading edge of their respective fields. Samsung is in a huge number of different areas and is the world leader in many of them. Japan has Nikon, Sony, Toyota and a few other big companies that are on the cutting edge in research, design and innovation. So, I don't accept the argument that the Chinese couldn't be creative.
Another point I was trying to make, is that over time as a country becomes the center of manufacturing and incremental innovation on a product, it's likely that they are going to be able to create the next radical innovation in that field. There are two things that support this. First, in a book by Andrew Liveris, the British CEO of Dow Chemical, there is anecdotal evidence to support bringing manufacturing back to the US along with the R&D that goes with it. The other argument is based on the research of Cesar Hidalgo of MIT that shows through network theory, that to become a leader in technology you have to build your way through a series of other technologies. It helps explain why it's so hard for countries to pick up creating semiconductors. However, as a country develops the technological capability to work within a type of technology they are likely to create innovation and changes in that technology.
China has effectively been given the ability to manufacture just about everything through outsourcing. They have the technological capabilities to build and design new technologies. China also has the resources devoted to it. They created a five year plan where they are going to invest $1.5 trillion in 7 science sectors. Because of these factors I believe that China is a real threat to US and European leadership in research and technology. For any one to dismiss China because of cultural reasons or technological capabilities is making a mistake and is likely to be surprised in 20 -30 years when China becomes a leader in at least one field, likely more than one.
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