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
Military historians have an amusing rule of thumb for determining which
army is most likely to win a war, the "Sukhomlinov Effect." Named after
General Vladimir Sukhomlinov, the Russian Minister of War at the start of
WWI, this rule holds that in any given conflict the loser is most likely to be
the side whose generals wear the prettiest uniforms. Sukhomlinov himself
was perhaps the most splendidly outfitted general of the war, with
gold braid embroidery down to his knees.
- “Senior”, www.snopes.com
23
“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)
24