Presentation to RPI’s MBA-Modernization Program, May 19, 2008
James Stodder, (Ph.D., Economics, Yale 1990)
Lally School of Management & Technology
Rensselaer Polytechnic Institute at Hartford
Hartford, Connecticut, USA
1
The Economist, March 8, 2008: “America's patent system: Methods and madness”
2
“Josh Lerner of Harvard Business School
found that patents on financial innovations
were 27 times more likely than average to
result in litigation. …. The most frequent
plaintiffs … are patent-holding companies
whose only line of business is the litigation of
patent suits.”
The Economist, March 8, 2008: “America's patent system: Methods and madness”
3
The Economist, Sep. 20, 2007: “A Matter of Sovereignty”
4
• Agriculture => Manor, Plantation
• Feudalism
• Industry => Family Firm, Corporation
• Capitalism
• Research => Scientific Circles, Universities, Firms
• New System?
The Economist, “The Next Society,” November 2001
5
“The Nature of the Firm,” Economica, 1937
- Firms exist to minimize “transaction costs”
“The Problem of Social Cost,”
Journal of Law and Economics, 1960
- Property Rights evolve to allocate property when
transaction costs are too high
6
• Firefox
• Linux
• EBay
• Google
• EBay
• Apple
• Wikipedia
• Apache WebServer
• MIT Open CourseWare
• Amazon
• MySQL (Sun)
• Travelocity
7
Smoke
Total
Value to B
Marginal
Value to B
Total
Value to N
Marginal
Value to N
0.0 0.5 1.0 1.5 2.0 2.5 3.0
0
30
30
35
50
20
30
5
60
10
20
10
0
20
Ronald Coase, Journal of Law & Economics, “The Problem of Social Cost” (1960)
8
9
Smoke
0
TotalVal-B
0
MargVal-B
TotalVal_N
MargDam-N
0.5
1
1.5
30
30
80
2.5
50
20
30
50
2
60
10
20
10
3
0
20
10
11
The Common Law is “an attempt to increase the value of
the resource by assigning property rights to those
parties … in whose hands the rights are most valuable.”
- Richard Posner, The Economic Analysis of the Law, 1972
Without flexible property rights, “the only way we
thought we could test out the value of the pollution was
by the only liability law we thought we had.”
- Guido Calabresi and Douglas Melamed, “Property
Rules, Liability Rules, and Inalienability”, Harvard Law Review, 1972
The Economist, Sep. 20, 2007: “A Matter of Sovereignty”
12
Copyright
Creative Commons
Public Domain
http://creativecommons.org/
13
http://en.wikipedia.org/wiki/Copyleft
14
• Dual Licensing (MySQL)
• Attribution
(96% of
• Attribution
+ No-Derivatives
CC
licenses)
15
• Firefox
• Linux
• EBay
• Google
• EBay
• Apple
• Wikipedia
• Apache WebServer
• MIT Open CourseWare
• Amazon
• MySQL (Sun)
• Travelocity
16
• Producers’ access to:
• Timely Review of Contributions
• Recognition of Peers
• Potential Customers
• Users’ access to:
• Tech-support and Updates
• Custom Applications
• User community
17
• Private Company gets access to:
• Development & Testing of New Ideas
• New “Eyeballs” for Error-Checking
• Potential Experienced Employees
• Potential Clients for Customization
• “Darwinian Flexibility” - Incremental,
User-Tested Growth
18
19
http://www.worldbank.org/data/databytopic/GDP_PPP.pdf
20
Formal Economy,
20%
Informal Sector,
80%
Hernando DeSoto, “The Mystery of Capital,” 2002
21
* Pierre Omidyar (founder of EBay)
$100 Million Tufts Micro Finance Center
* Compartamos (Citigroup $70 Million)
- 500,000 Customers
* Gates, Dell, & Google Foundations
- Large Micro Finance initiatives
“Millions for Millions”, Connie Bruck, New Yorker, 10/20/06
http://www.newyorker.com/fact/content/articles/061030fa_fact1
22
• Apple vs. Microsoft
• US vs. Europe
• Guerillas vs. Traditional Armies
(Mao vs. Hirohito, Tito vs. Hitler,
Castro vs. Batista, Ho Chi Minh vs. Johnson)
speaking of which …
23
The Sukhomlinov Effect
There is a nice rule of thumb
for which army is most likely to
lose: the "Sukhomlinov Effect.“
Named for Vladimir
Sukhomlinov, Russian Minister
of War in WWI, this rule holds
that the loser is most likely to
be the side whose generals
wear the prettiest uniforms..
24
“As the flow of water is determined by the earth, so the victory of military force is
determined by the opponent. Military force has no constant formation, as water has no
constant shape. To gain victory by changing and adapting to the opponent is called
genius.
“Therefore the consummation of forming an army is to arrive at formlessness.
When you have no form, undercover espionage cannot find out anything, intelligence
cannot form a strategy.”
- Sun-Tzu, The Art of War, 500 B.C.
“The Law of Requisite Variety [relates] the number of control states .. to the number …
necessary for effective response. This allows us to formalize … the limitations of
hierarchical control …, e.g., the military, healthcare, and education systems.”
- Yaneer Bar-Yam, www.necsi.org (2004)
25