The Evils of Intellectual Property

0:00The topic that Briggs wanted me to talk about tonight is a topic that is my own personal obsession. It's always a good idea, if you're ever scheduling any events, when you ask the speaker to talk, to ask what he's obsessed with, because then he'll give a pretty good talk. So I hope that this will be a pretty good talk, we'll see. The topic is intellectual property, which sounds dreadfully boring. I wonder how many of you have heard of the concept of intellectual property? Could you just raise your hand? Okay, so there are some, yeah, okay. So maybe not everybody knows about intellectual property and its meaning. And it's a very interesting idea because, you know, it's one of these things you sort of take for granted. As a matter of fact, belief in intellectual property spans all political divisions. I mean, you'll find people on the the left accept it and people on the right accept it and everywhere in between and every regular person just believes this, you know. And by believes this, by the this, what I

1:03mean is that there's such a thing as property rights and ideas. So for example, if I believe in intellectual property and you believe in intellectual property, then anything I'm saying to you tonight is really mine. It's my personal property. And if you go outside of this room and you report it, any part of what I say, then you're taking my property. So you really should ask me. This is the idea. Because I possess some kind of ownership over the expression of my ideas. People who advocate copyright, for example, say that, look, it's not the ideas of such that are being owned, but only the expression of these ideas.

1:50To me, this is an irrelevant distinction. Would you agree with this, Dr. Long, that it's an irrelevant distinction? Lawyers are always saying, look, you've got the whole idea wrong. It's not that you own the ideas, it's you own the expression of the ideas. Okay, then the expression of the ideas, whether I express them in a paper, if I write them down, or if I'm saying them out loud, you know, This recording belongs to me, it doesn't belong to you. If we put it on the internet, you can listen to it with my permission, but if you share it with somebody else, you're violating my rights. And I think it's important that we distinguish here between what the law allows and what you might say, what is actually a violation of rights. Do you see what I mean?

2:38For example, if somebody is 17 years old and drinks a beer, we would distinguish between what's legal and what's immoral, right? You might say, but that's illegal to drink a beer when you're 17 because the law doesn't allow it, and we can all agree with that. Somebody else might say, well, it's not just illegal, it's just downright wrong, okay? So there's a difference between those two things, right? and what's legal and what we might evaluate in terms of morality. So it is with intellectual property, so I would like to talk about the rights and wrongs of intellectual property, not so much what the law permits or doesn't permit, I find the law personally preposterous. But more so than that, I would like to speak to the issue of the morality of intellectual property.

3:30My thesis is quite simply that the idea of intellectual property is completely made up. And it's a totally modern notion that dates roughly from the age of mercantilism and in particular the early 17th century in England. And that's it. And it's continued to be with us and gets more preposterous every day. Slowly very recently, for example, in 1995, I believe it was, with the Sonny Bono Copyright Act, Congress did the most massive land grab in the history of the world and retroactively copyrighted all sorts of manuscripts that had been already put into public domain dating back to 1962, for example. And why did they do this? Slowly to protect the property rights that Disney had to, that mouse character, Mickey Mouse, because he was about to go into the public domain.

4:28So that's what Congress did. That's very recently. But the notion of intellectual property itself has been growing since the 17th century and has gotten worse and worse and worse. There are several things we can include within the category of intellectual property. Copyrights, I've already mentioned. The other one is patents. Patents are a different form of intellectual property, maybe you know what it is, you come up with a unique invention of some sort, you raise to the patent office, you hire a lawyer to draw a picture for you and lays out all the documentation, you file it with the U.S. Patent Office, the Patent Office gives it to you as a reward for your innovation and then from that day forward until at some arbitrary stopping point, you're the only one who can benefit from the production distribution.

5:18and Profiting of this invention. That's a patent. It's related to copyright in the sense that both rely on this notion of intellectual property. So, here's the problem with intellectual property, ultimately, and why it becomes a problem in our times. And it is this. Ideas, unlike real property, are infinitely reproducible. Real property cannot be infinitely reproduced outside a situation in which there's a miracle. An example of such a miracle in history or at least in literature is a scene from the Bible when Jesus is speaking to the multitudes and his speech runs a little long and it starts to run through lunch and the multitudes are getting very annoyed because they're very hungry and they begin to grumble, Are we going to get lunch around here or what?

6:28Are we just going to have to listen to the Messiah all day long without anything to eat? And one of the followers of Jesus says, well, look, there's no food anywhere. I don't know why the people didn't think to bring a sack of lunch. They didn't expect him to go on so long, probably. But one of the apostles says, well, look, I have some loaves and some fishes in this little basket. and Jesus, very impressive, does something to cause these loaves and fishes to multiply infinitely and feed the whole crowd. Does anybody know this story? Have you all heard this story? Okay. All right. That would be an example of the infinite reproducible. And by the way, the Bible says there is some leftover in the end.

7:13How do you account for it? I don't know. But it's recorded. It was so notable. It was recorded in the Bible as a miracle. Okay, we can expect this kind of, so when this happens to physical property like loaves and fishes, it's a miracle. In normal life, we don't expect that to happen. For example, if I have a biscuit and you say, I admire that biscuit, may I have a copy? Well, I can't do anything about it. I can't give that to you. I can break it in half, then you have half my biscuit and I have half the biscuit, but now I have less biscuit than I had before and whatever, I'm less, you now have subsidized in terms of your biscuit quantity that you possess and I have less. And so it is, or I can give you the whole biscuit, but then I don't have a biscuit.

7:58With ideas on the other hand, if I give you all these wonderful ideas I'm saying right now, you can take them with you, but does that deny me anymore, my ownership over what I'm saying? I mean, have you robbed me? For example, I mean, everything I've said up to now, If you take it with you and repeat it, do I wake up tomorrow morning unable to say these same thoughts again? I mean, you know, I wake up thinking, you know, I read a book about something last night and I have no idea what it was, because you took my idea, right? You took it out of my head. No, of course not, because the ideas have this strange, and I would say almost miraculous capacity for infinite reproducibility, and that makes them uniquely different from all forms of physical property.

8:44So, in this sense, they have to be thought of in a different way. I think we can neatly divide the world, actually, between two kinds of goods. Those goods which are scarce, like biscuits and steamships and back scratchers and Velcro laced shoes and every physical thing you can possibly think of, money, unless, of course, for Central Banks Involved, and everything that's not scarce. And we can sit around and think about those things that are not scarce. One of the first things that comes to mind is air.

9:29Is air not scarce? I think probably it is scarce. Because, for example, we have an air conditioner in here, designed to give us a special kind of air. and it's scarce and it's only contained within this room. Even the air outside this building is unique to Auburn. I mean, if you go to Birmingham, you're going to experience a different kind of air. I don't think you can say that air is infinitely reproducible in that sense. I think it's probably a scarce good. Water, same thing, same thing. So, does anybody have another thought about what might be a non-scarce good that you can think of? Any suggestions? It's tricky, isn't it? Think about non-scarce goods.

10:15I would suggest to you, I can actually think of one apart from ideas, and that would be fire. So, for example, if I light a match, you know, I can set the building on fire, and yeah, still holding the match and it's still burning, right? So you can create a roaring bonfire or just contain it very small. Yes? The fire depends on oxygen, air, resources, water.

10:53There's a different sense of scarce. You get a different sense of scarce.

11:04The first thing I can think of is ideas because they are truly infinitely reproducible and an illustration of this is that if you receive, for example, a recording of my lecture on your email on an mp3 file and you forward it to 100 of your friends, that doesn't take it off your hard drive or the server on which the original email is stored, it continues to be multiplied and it can be multiplied to infinity. So digital media, in a way, has the same capacity as ideas themselves. I'm saying an idea to you, you take it out of this building, you say it to somebody else, and they say it to somebody else, and so on and so on until the end of the world. So digital media has the same capacity for infinite reproducibility.

11:53So it's not a surprise that the issue of intellectual property has become such a source of controversy in the digital age, because for the first time we're seeing the way in which ideas can be transported and sent and delivered in infinite ways and it's alarming lots of people. For example, if you use Auburn University internet connection to download movies or download songs, you have people all overview because they claim that you're violating the rights. I would suggest to you that you're not violating anybody's rights, you may be violating somebody's policies, but it's not actually a violation of rights, because ideas and the expressions of ideas and music and all those things that are associated with sound and even visuals, things I look at, I can have an image in my head and I can take it with me and I can close my eyes and imagine it. I'm not violating anybody's rights when I do that. I can look at somebody's face in here, remember it tomorrow, I haven't stolen your face. It's not robbery.

12:58because there's no property rights to the visual images I see. Whereas in the physical world of goods exchange and scarcity, there is ultimately what I have you can't have. So that's the difference. So how did this idea of intellectual property come about? And let me just kind of review for you the history. But actually before I review for you the history, I want to tell you that it strikes me there's two ways. The idea of intellectual property coincided with the advent of movable type publishing in 1450.

13:47Before that time, books could only be reproduced, copies could only be produced by scribes, and they would sit and scribe books. The main job of people up until that time was just keeping books alive. You had to be kind of a big shot in order to get an original work published. It's not like today where you can just go and get a print-on-demand publisher to publish it for you. You had to be like a bishop or a St. Thomas Aquinas or something like that in order to get a book published before 1450. It was a lot of work. Most of and all the time was spent scribing. So mostly people in religious orders that were highly exalted and very talented would scribe out works and it would take up to a year of full teams of people to produce anything remotely resembling a single book.

14:33Now I should say too that before the Gutenberg Bible or the Gutenberg Psalter actually, which was first in 1450, there was one thing the monks would do. So they would make like wood carvings and press them on the paper, rather than having to draw everything freehand, they would press them down and then like hammer them on, and they would do this out of stone too and hammer the stones into the vellum, the parchment, and be able to make copies of images, but they wouldn't last very long, you could get like seven or eight, you know, pressings out of those before it would wear down. That was the best thing anybody could come up with before the age of movable type. But then this great Goldsmith, Hans Gutenberg, came up with the system of moving letters around.

15:20Actually, the original system was invented in China, but it turned out that the Chinese language didn't lend itself to movable type too well because there were too many characters, so it waited for a Western style alphabet before it was really usable. Anyway, after that, then we saw for the first time the capacity to make a copy of a book, like an identical copy without involvement of the human hand. You just have a machine, press it, here's one, press it again, here's two, wow, they're practically identical. Amazing. It's like, again, it's like the loaves and the fishes or something. Infinite numbers of books are possible now for the first time, and they've made a bundle of money off these Bibles. Let me tell you, it was a big commercial success, and understandably so. But a couple hundred years goes by, and there arose, especially within England, on the continent, two but primarily in England, an establishment of publishers.

16:13It's very interesting, you know, the debates about piracy, they go way back. Back in the 1600s in England, you had the large firms, the large publishers complaining about pirate publishers that were taking old books and reprinting them all the time and ruining the market for new books, and the publishers complained, well look, this is a disaster, we've got these pirate publishers out there publishing these books that have already been published. And this is ruining the market for our new books and we're not able to pay authors right now. So it's exactly the same thing you hear all the time. If you continue to download books, you know, how are we going to be able to make any profits to pay authors? Creativity would die, you know, this is always the claim. So the early English publishers latched on to the predominant movement at the time in economic circles called mercantilism.

17:05And the theory was that the king had to give special privileges to certain producers, to producers, whether it was salt or copper or whatever kind of thing happened to be distributed in his realm. He had to give special privileges to certain producers in order to assure that the people would continue to get the product. And the producer would threaten, look, if you don't give me exclusive rights to produce something, I may not show up tomorrow. Still, whatever it may be, I may not show up tomorrow and then your people will be denied the products. Look, you'll benefit, too, because I'll give you a cut. So the king always went along with this, and the publishers got into the mercantilist business, too, by promoting their own, what they called copyright cases. We have intellectual property associated with this work.

17:51Nobody else may produce it. In England, in particular, this was particularly appealing to the ground because what was going on at the time, the massive religious wars. The Catholics were in charge one minute, the Protestants were in charge the next, the Catholics again, and then the Protestants and the Crown always found it, and it's very much in its interest to be able to control what was published. So this is the origin of copyright. It didn't actually catch on in the continent until the 19th century. It was the beginning of copyright laws in the continent. So we went a long spell of just total freedom. Before this time, though, you have to understand there was no such thing as copyright. Copyright. It was inconceivable because the technology didn't impress upon people the problem of what do you do with copies because there wasn't a capacity to make copies except by hand. You see, that's why copyright became a big deal. In terms of patents, it began

18:45at the beginning of the Industrial Revolution and you know there's a huge in England and there's a huge debate in Parliament over the patent to the steam engine and the classical The liberals, the libertarians of the time were completely against it on grounds that they saw patents as a grant of industrial privilege to one producer at the expense of all other possible producers. The right to make one good and for one company to make a single product and the government would coerce everybody else against making that product. So that was the origin of patents. It's remarkable to think that most all kinds Patents of mercantilism disappeared over history, but this one kind persists to this day. Patents and copyrights persist to this day as a unique form of mercantilism applied to the realm of ideas. They're completely unjustified. I actually had planned to begin the lecture by talking to you a little bit about one of my favorite industries, namely the fashion Industry, which has absolutely no IP connected to it at all.

19:57And maybe as you're listening to me talk you're thinking, look, in a world with IP there would not be innovation, there would not be profitability, people would just be copying everybody and everything would completely collapse. Well, what I'm telling you, if you, sometimes it's hard to imagine what freedom looks like, well, just look at the world of fashion, okay, there you have total freedom. Designers, Calvin Klein, Ralph Lauren, all the rest of them, whatever, cannot copyright their designs, they cannot patent their designs, nothing is subject to any kind of intellectual property in the world of fashion, and let's look at the way the world works in fashion, you know, it's a very fast moving industry, highly profitable, but incredibly competitive, because of the absence of IP, it is enormously competitive, in other words, without a state grant of monopoly privilege to ideas, the industry is extremely vibrant and constantly fast changing. In fact, everybody complains about this all the time because it's actually too fast changing for most people.

20:58But what happens is that in the fashion industry, a designer is probably two years in advance of the release of his newest clothes, his or her newest clothes, is drawing out in secret and all of his plans and then the things are made and they appear at the market on the runway and as they're appearing the reviews are taking place and the producers of the clothing have already taken some of those designs and put them out into the vendors, the wholesalers who are selling things right downstairs to all the retailers. The retailers go in and buy up everything for the next season. And you're having to buy, you know, your fall merchandise in like November so that it arrives sometime in the summer.

21:47It's a tremendously risky thing, but get this. You know, these things arrive on the shelf in the fall. So you can go over to Talbot's and find a blouse for $130 that looks a certain way, and it's very impressive. And you put down the money because you've got to have it. And then a year later, you walk into Walmart and you find almost the exact same thing for fifteen dollars. Almost an exact copy, as close as possible. Maybe the materials aren't as good, but it looks pretty much the same. That's the way the industry works. Everybody is robbing everybody else, which is another way of saying that they're learning from everybody else, emulating the profitable producers to get some of those profits for themselves.

22:35If you think about it, this is the way the free market is supposed to work. You can review your economic knowledge and understand something about profitability as a signal to producers. Every entrepreneur is looking out over the economic landscape and seeing a scale of profitability, sees one producer over here making a tremendous amount of profits doing certain kinds of things and goes, you know, that worked for him, I think I'll follow it and do the same thing. So a new enterprise pops up to do the same thing, becomes in competition, his profits begin to go down, his profits begin to go up a little bit, eventually level, other producers jump into the market, eventually profits for everybody gets lower and lower and the margins fall and fall and fall until they approach the point of zero.

23:24This is the way markets work. If you want to think about the free market this way, you can look at it as a gigantic conspiracy to reduce all profits to zero. I mean, that's pretty much what the free market is and a competitive free market. What IP does is stops this process and says, oh, this producer over here is making all these profits. Here's your grant of Monopoly privilege. Here's your little badge of honor. You are the only one allowed to do this, produce this book, make this machine, make this dress design, and you can continue to do this for seven years, for 30 years, for 100 years in the case of copyright. You know, unbelievable. So, if you did this, for example, in the world of fashion, if you applied intellectual property in the world of fashion, Walmart would not be able to come out with Talbot's knockoffs the next year.

24:09Only Talbot's would be able to do that, and you would continue to have to pay $115 for that blouse instead of $15. Now, let me address the question of the ethics of copying. It strikes me, as we look back over the history of economic development, Copying and emulation is an essential economic institution, just as it is an essential social institution. And it all depends on the way you think of it, okay? My little girl, not this one, an even littler one, goes to school and she came home to me one day, she said, Dad, I wore a scarf on Tuesday. And Wednesday, Sarah was wearing a scarf too.

24:58And isn't that terrible? She just copied me. I mean, this is just so awful because she said that to me. And I said, well, why do you think it's so awful? Well, because she just ripped me off. So I'm thinking, she's got this IP mentality. She doesn't understand that her fashions that she's wearing are infinitely reproducible. The idea of wearing a scarf can extend all over the whole world and never diminish her rights at all. So she doesn't So, I just rephrased it twice as well. But, isn't it lovely? You think about it. On Monday, nobody is wearing scarves. On Tuesday, you wear a scarf. And on Wednesday, another person is wearing a scarf, so now there are two of you. I mean, by the end of the week, the whole school may be wearing scarves. And look at the effect that your one action had on your social circle. You have changed the world.

25:50Your idea has been copied by everybody and you have made a dent in the universe. That makes you enormously important. And what a ratification of the success of your idea of wearing a scarf. Congratulations to you. If you continue to do this throughout your life, you are going to make a huge difference. The world could be a different place completely from the one that you came into. And all because of you. And she looked up and said, oh yeah, that's right. Oh, how wonderful. You're right. That's great. So she suddenly had a different attitude. You see, it all depends on how you look at things, right? Well, unfortunately, in the history of economics, there are lots of capitalist producers who have not looked at it that way, because they thought that if other people copied their ideas, it would ruin their profitability, and they might have been right about that.

26:40But you know what? You know what the consequence is? Society is poor. That's the problem. That's the problem with copyright and patents. It makes everybody poor. Because there's no competition. If we could extend the model of fashion to the whole world, the whole world would be like the fashion industry. Highly profitable, very competitive, constantly changing, you know, slavishly devoted to the consumer desires. Instead of the way it's becoming in industry after industry after industry stagnant, you know, a handful of producers uh... producing things racing each other to the patent office to to get the to get the goods and to get the privilege to get the monopoly and then jacking up prices for all the consumers it makes everybody worse off and this is not anything new this has been going on now ever since the origin of the patent and if you look back at the history of innovation and at the history of enterprise uh... you will see that the history of the patent has produced one

27:42racketeer after another. And let me just name three of them. One is named Eli Whitney, the so-called inventor of the cotton gin. You know this guy? Have you heard about Eli Whitney? This is a museum, Eli Whitney Museum, the inventor of the cotton gin. Yeah, okay, the guy did not invent the cotton gin. There has been cotton gins since about the fifth century. Huge innovations took place between the twelfth and the fourteenth century. In the early nineteenth in 19th century America and the deep south here, everybody was using cotton gins, mostly with rollers. There were cotton gins all over the place. I mean, before I read this history, I had imagined that before Eli Whitney, people were just sitting around going, oh, God, why did we get this crazy seed inside this cotton?

28:27You know how you do? And then this one genius comes along and says, no, not at all, here's my machine. That's not the way it happened. It was a series of slow steps, evolution from the 5th century up until the late 19th century. 19th Century and in fact all the way up to our day. So who's this Eli Whitney guy? Okay well so he was talking to this aristocratic you know woman I forget now her name it's terrible I don't remember her name. She suggested to him that that the cotton gin as it presently exists it could be improved with a little brush technique. Yeah how'd you know? You know everything. Nobody should lecture nobody nobody should lecture except this guy right Katherine Green. So he goes races to the Patent Office and patents this one little thing and then claims to then own the cotton gin and spent the rest of his life until, well, spent the next couple of decades running around trying to shut down everybody's cotton gins all over the country, everywhere

29:23there's a cotton gin. He went and claimed that they owed him, I don't know what it was, 30, 40 percent of the profits or something just because this was allegedly his idea. This is the great Eli Whitney. Later on he, and he bankrupted himself by the way with Lawsuit, as most of these people who pursue this kind of IP enforcement end up doing. So later on he went into interchangeable parts for guns and he wised up and decided not to try to patent his ideas and he actually did much better in the gun market than he ever did in the market for the cotton gin. Another case in point, the Wright brothers, I mean I've developed this intense hatred of the Wright brothers over the last week or so, as Julia can tell you, I just never or shut up about the evil of the Wright Brothers.

30:09So they invented one little small, the legend has it that they were in a bicycle shop and they invented flying. Well, it turns out you can look it up and see that there are about 20 competitors for the title of first in flight. Most of them shared ideas with each other in the name of advancing humanity. The Wright Brothers were unique in the sense that before they ever got to work on their Airplane Model, they hired a lawyer and a team of lawyers that were seized on getting the patent first, that was their number one thing, that's why they cared way more about the patent than they cared about the airplane. So consumed with this obsession, you know, they actually, most people at the time were trying to fly longer distances and higher through by using larger and larger engines.

30:55The Wright brothers had an insight, as is most of the case, the same thing with Eli Whitney and the Brushes, you know, the Wright brothers had an insight that they could put a moving part on the wing to equilirate the airplane in a better way, rather than building ever larger engines. And it worked, but they went immediately, and other people had simultaneous inventions, by the way. They went immediately to the patent office and patented their crazy contraption and went around suing everybody afterwards and they caused such havoc, the Wright brothers, in the United States that by the time of World War I, the U.S. industry in airplanes was so behind that in order to even get off the ground with anything like a flight crew to fight the war The U.S. had to buy all of its airplanes from France, you know, because they were so much far advanced.

31:53So you see the way the Wright Brothers patent actually retarded progress. You know, the patent comes along and says, okay, that's a neat innovation, stop. You're the kings. You get all the profits from now until whenever we say, and then nobody else can innovate. So it retards progress. We see this actually every day. Another case is Alexander Graham Bale, another absurd figure in patent history. As a matter of fact, if you look through the history of invention, lots of people name the great innovators according to who got the patent. This is just the wrong way to look at it. The right way to look at it is capitalistic innovation usually occurs at the margin. Small improvements, people copying those small improvements and making a little better improvement and so on and so on.

32:43It all works like software. You know how software works, right? Everybody's contributing a little bit of something, a little bit of something, here's a new version, here's a new version, try it out, get out the bugs, thanks for that idea. Now let's improve it a little bit. Here's something I can add. This is the way innovation works in the real world. It's not usually one great genius coming up with a completed project that the government then ratifies and says, Here's your Just Desserts for your innovation. It usually occurs in the margin, and it would work that way more so in the software industry if, in the 1990s, the federal government didn't decide that software should also be subject to patents and copyrights, and that has seriously injured the industry, we would be much further along, not only in the area of software, but in every other area of life, if it hadn't been for this one fact.

33:36Address some typical objections here particularly in the area of copyright because this is an industry that that we work in at the Mises Institute and What we've decided to do as a way of fighting copyright is to put all of our books into creative commons Creative commons is a special license that Now if we are up to us, we can just completely abolish copyright and not worry about it again. Unfortunately it exists so what this means is that You must copyright your ideas or else somebody else can take them and then prevent you from using them. So if I leave a manuscript out here that doesn't have my name on it or a copyright seal on it, you could pick it up, publish it, copyright it, and prevent me, if it belongs to me, from ever publishing it again. So this is why you have to use copyright to some extent, if only as a defensive measure.

34:23But you can put it into Creative Commons and permit then an infinite sharing of these ideas under a series of terms. I mean, you can say, you know, as long as you don't profit from them. The one we use is attribution. All we ask is that people, you know, attribute Mises Institute as the publisher. But actually, in my own view, that wouldn't even be necessary, you know. So, now, people say to me, this is preposterous. You mean to tell me that if you publish a book, anybody else could take and photocopy that book, put it between two covers, and sell it? I mean, why would you be in the publishing business if you're going to allow something like that? That's ridiculous. Nobody would be in publishing if this was permitted. You know what? We permitted, and we're still in the publishing business. And why? It turns out it's something of a pain in the neck to get into publishing.

35:10I mean, it takes a big investment. You've got to have more than just a book between two covers. You've got to have a distribution method. You've got to have a warehouse. You've got to have consumer service. You've got to have a lot of things besides just a text. So, for the most part, we have the monopoly, the market monopoly, because we're the first to print. We're the first to go to print with it. And it's the same way in a whole series of industries in the real world. For example, you know that company that came out with that bag that rolls? I mean, you're probably all too young to remember the days when all suitcases you had to like carry, because they had a handle on it, you know, no wheels at all, you couldn't drag them along. One company came out with this idea of the suitcases and so it is with us. Now, I would suggest to you that if we eliminate copyright, it would make the market for books more competitive and it would also help publishers, and let me just quickly tell you a story of how it helped me, and maybe you can get a better idea of how it helped me.

36:26A Glimpse of the Way the World Would Work Without Copyright We published a book called America's Great Depression. It was by Murray and Rothbard. We published it in hardback because we are very proud of this book. And we published a beautiful hardback book, and we said, look, this is a nice book. It's got a wonderful introduction by a famous author, and the text itself is invaluable, so we're going to charge $30 for a great hardback book. And so it was for a very long time. And it never occurred to me that maybe, and we published 300 books, so how would I know? And I love this book, so why shouldn't people be willing to pay $30 for it? And it sold. Everything was going great for us. And then one day, about eight months ago, I woke up and sales of the book had fallen flat. Nobody was buying our book anymore. And this was at the time when everybody should be curious about what caused the Great Depression. Nobody

37:19So we did some research and found that some smart ELEC publisher in New York had put out a paperback edition of our book that we had put into Creative Commons. And of course, I mean, what's your response to this? Outrage, right? I was outraged. He took our book, put it in paperback and he's selling it for 15 bucks on Amazon? No wonder we're not selling any more books. Who does this guy think he is? Of course at once it's outrageous, but it's also kind of exciting. So suddenly we had a competitor. So then, so that's exciting. I mean people like competition. So everybody likes competition. So we thought, okay, what can we do? So the obvious thing to do is to come out with a paperback edition. So we rushed, we poured it on, contacted every kind of, every kind of dealer you could possibly find. You know, we drove the price down as low as we could.

38:10you know if we could have waited longer and gotten a lower price to buy the books but no we wanted it out fast because we wanted to kill these people so so we got it printed fast and I had to pay a lot of money for the print it and I priced it just we priced this book just right barely above what it cost us I mean we were just stopped short of paying people to buy it I mean that's how that's how thin our margins were right so within two weeks we had a paperback edition of this book out on Amazon for $12, guess what happened? We sold hundreds of these things. And even to this day, I'm just thrilled to think at how much we made our competitors suffer. So that, and they probably have a warehouse full of, that'll teach them, you know, to copy us, right? So, so this is fun. This is a great way to do business. And look, you know, it's true that

39:07We paid a very high price for this, you know, but who benefits? I mean, you've got this preposterous fight going on between these two editions of a book, but who benefits from it? It's the consumer. I like this system. I think it's fun to compete. I mean, monopolies are boring. I mean, who needs it? It's terrible. It's a terrible life to live off government privilege. Oh, you know, send me my money, you know, and if anybody tries to compete with you, compete with me, I'll sue them. You know, that's a terrible way to live. It's much more exciting to enter into a realm of freedom and to beat your competitors fair and square by offering the consumers a better deal. And if we got rid of copyright, that's precisely what would happen. As a matter of fact, copyright is going away, as you all well know.

39:52Almost anything is available for instant download right now, and I'm sure you're all very sophisticated about how to go about this, and you would never share Here are your tips in public, especially not on a recording here, but you can get just about anything digitally with a quick download and that goes not only for books but also for movies and for everything else. There is no chance that the world of copyright can stand up to this technological advance. To me, it's very exciting. If you look at one theme in the whole history of the world, it is that anybody who resists innovation and and technology dies. They cannot live and they never live. So the copyright mavens and these people who are living off their government monopolies, they are being run over by technology and they will not live. They will die. So it's just a matter of time. And I congratulate anybody who fights the system, within the law, of course. I'm just teasing about that

40:53Okay, now it's also true, now let me just say this about patents. It's not as easy to subvert the patent system. The patent system is currently catastrophic. It's tying up the software industry, it's tying up the industry for cell phones right now. You know, if I come up with a good innovation, I can patent it. And why do I patent it? What if I just decline to patent it? This is the problem. What happens to me? What happens to me? Somebody else can take my innovation, go to the patent office, patent the thing, prevent me from using it. This is a catastrophic situation. Because most patents are what's called defensive patents. Most everybody takes out a patent in order to prevent themselves from being robbed or prevent themselves from being sued at a later date.

41:42So we've got a terrible situation where actually, in fact, most people, most industries would be really happy to get rid of all patents immediately, if they could be gotten rid of across the board, so they wouldn't get access to anybody. But because they are available, everybody has to accumulate these war chests of patents in order to protect themselves from being attacked and from being looted. I don't entirely know what the solution, I think I know the solution to copyright, I think it's going to destroy itself on its own. I don't see that there's any future with this institution. Patents are a different problem. We desperately, desperately need patent reform. If anybody voted for Obama in the hopes that the federal government's attack on real rights in the name of intellectual property rights would diminish, you'd have I've been sorely disappointed because Obama's own appointees in this area have been fanatic IP people, just like Bush's people before him and on and on back in time.

42:45And it's not a left-wing issue, it's not a right-wing issue. They're both terrible on the subject. But what I'm telling you is that if we continue down the road that we're on with patents right now, We can destroy the capacity of society to produce any kind of innovation. You see how it happens. Imagine if every new product, every new idea, every innovation we experience, and we are subject to innovations every day. I mean, every day when you open up your Gmail and there's a new theme, you know, that you can download, that's an innovation. And if every one of these things, and you can multiply that example by billions and trillions of every new idea were locked into place and given a government monopoly so that nobody could learn, nobody could emulate, nobody could copy, you could shut down society just practically overnight and everything would collapse because you shut down the market economy, you shut down competition and you shut down the capacity for us all to learn from each other. A consistent application of intellectual property would

43:54would be something like a Stalinist style society. It's utterly and completely incompatible with freedom and incompatible with the market economy. Okay, I've said everything I think I want to say about that. I'm really glad to... Yeah, the two ways. I covered it with the scarf example. Yeah, so I think I'm done. I'm glad to open it up to questions. I know I've said something that must have alarmed somebody here. Yes, go ahead. Question asked by audience

44:32Yeah, well there are always suits, you know, the thing about America, you know, it's free countries so you can sue for anything But the suits aren't gonna go very far. In fact, there have been lawsuits over advertisements, your advertisement looks too much like mine And so you can sue in America for anything, but the hope is that of course Of course, courts could decide whatever they want to decide, but at least in a formal sense, fashion is not subject to IP. Another industry that's not subject to any kind of intellectual property protection is the font industry. A very interesting case to me, because I find myself having to buy fonts all the time. Now, I can send my package of fonts to somebody else, and they can send them to somebody else and somebody else and somebody else, and you're not violating any laws here. It's just that the font industry has become very sophisticated about downloads.

45:19and I mean probably you could download every font imaginable if you had the right, you know, the right website or something, you know. Okay, okay, okay. But for the most part, I guess I'm the idiot. I'm always pying my fonts, you know, and getting the license thing and installing things, I don't know. But font industry still makes money despite the absence of IP protection. Another industry that has been spectacularly unsuccessful in getting IP protection for itself, even though it's technically entitled to it, is what you might call the red light district of the image industry, if you know what I mean. So in this particular industry, it turns out the courts are not very favorable to the idea of granting anybody any judgments in their favor for having been robbed of their titillating imagery.

46:17So IP has not worked in this industry at all and in fact images that entice people in their reproductive capacities have been extended infinitely all over the world and in many places in many ways and the industry somehow continues to be profitable. So you see what I mean. IP would technically apply to the red light district but it doesn't in fact. and Fact. But nonetheless, the industry is enormously profitable. Another example, and this is my final example of what I consider the libertarian utopia. Here's the libertarian utopia. Recipes. You can't copyright a recipe in the United States. If I tell you how to make a wonderful beef stroganoff and I publish it or whatever, you can take my recipe and publish your own book with the beef stroganoff and you won't be I'm not going to be violating anybody's intellectual property rights because copyright cannot apply to recipes.

47:15Very interesting because you can go over to Barnes and Noble and see that it still remains an enormously profitable industry. Nobody's being hurt. How do you package a recipe book? You put an amazing picture on it and you have some dazzling chef on the front showing you how to make easy recipes. It's the compilation. It's the marketing. What makes a recipe book valuable? Maybe it's the arrangement of recipes and the pitch. and the obscurity of them. Maybe they're the first one to ever publish this recipe of black squid from Salamanca, you know, and nobody else seems to have the recipe, then they make a profit. So you can't apply copyright to recipes. And the industry, again, it works just fine. You see how freedom actually does work, and you can imagine it by looking at these little sectors that remain free of intellectual property. It works just fine.

48:05Yes.

48:36I wish I understood more about the subject. I do know that whatever industry IP touches, it leads to total stagnation and disaster. And this has happened again and again and again throughout history. And this, taking out copyrights on genetic codes and things, and certain strands of DNA and all these things, apparently very scientifically could be disastrous. That's a whole chapter on the subject and this book I'd recommend to all of you called Against Intellectual Monopoly by Michele Boldrine and David Levine, two economists. Yeah, actually, this is a wonderful book. You have to go to their own website. You can download it for free.

49:22That's an interesting case because that, yeah, and they've got a whole chapter on the subject. It's an interesting case of two authors who wrote this radical book against all intellectual property regulation at all, and they're academics, and so they needed it to be published by conventional publishers. They chose Cambridge University Press, I can't remember, which has a conventional copyright system, right, but they wanted to get it out there. I told them, next time you need to publish a book, come to us. So they maintained copyright to that text. The authors Publishers did persuade them to let them put it online for free, but nonetheless, the publisher has a monopoly to produce that book and they're charging outrageous prices, exactly as you expect with any kind of monopoly provision, everything is more expensive than it should be. Look at your textbooks you have to buy, blame IP for that.

50:10So this book is like 35 bucks and I've been harassing the publisher all the time, let us publish this book, let us publish this book, the authors want us to publish the book, We sell it for ten bucks, you know, but they have the intellectual property to it.

50:47Yeah, but it's a funny thing and people get browbeat by these claims. The claim is that you get a prescription from the doctor. I was somewhere, I went to the doctor and I was having like a sinus infection, he gave me some nasal spray and I went to the CVS and I said, well, that's like $160 or something. You know, so I declined to use it, you know, I declined to buy it. I mean, I get annoyed at this stuff because it's absurd. But what they say is, well, you know, I'm sorry, but these things are very expensive Well, you know, so are, so is Calvin Klein's latest three-piece suit. You know, I mean, lots of things are expensive. What you do is you have to allocate your expenses relative to your expected profits. You can't just spend all you want and then charge a bazillion dollars for the final result and expect everybody just to comply. I mean, I imagine if we went the way to make money is to be the first one to market. You keep it all secret and then

52:12When you explode, here's our great thing. Everybody goes, ah, that's great, and they love you. I mean, an example of that would be Adobe's PDF, Adobe Acrobat. So they still are able to charge $700 for their program, even though there are as good or better programs out there for like 90 bucks, or free if you know the right download type. But they're able to do it because they're the first market. So you get to be the first. So it is in pharmaceutical They should come out with their products and say, look, here's our amazing nasal spray. And everybody goes, buys it, and they experience profitability for a long time. And they have a brand name attached to it, like you can go to CVS right now and buy Bayer aspirin or CVS aspirin. And you're standing at the two, one's $4 and one's $2. And you think, well, I think I'll get Bayer.

52:59Why do we do that? I don't know. We do it. People do it all the time because they're the name brand. So it would be the pharmaceuticals. But there's a problem, because in the FDA approval process for getting drugs to market, They have to cough up their entire system for making the drugs, right? They have to make everything completely public, which means that other people have the ability to copy everything that they're doing, even before they've sold a single pill or a single spray bottle. So this is a problem. You see what I mean? It's a problem for these companies because they are required by law to give up, you know, everything before they go to market. So if we're going to get rid of pharmaceutical patents, we have to do something about allowing these companies to operate as normal companies would, which is to surprise people with their amazing product, like it is everywhere else in the market.

53:52That way they can be profitable and establish a name brand for themselves. So I would just add that one provisional. If we got rid of patents on pharmaceuticals today without getting rid of the FDA and its intrusive control over some pharmaceutical companies, we'd never see another drug.

54:28______________________________ You can never know in advance what the market is going to render, I could go out in my backyard with the expectation that somebody in this room is going to pay me $235,000 for it. Is it just for me to expect? It's a speculation.

55:14Nobody knows the future. We have to calibrate what we do today relative to the return tomorrow. It's that way in all aspects of life. I mean, no matter how much time you've put into something, the value of an idea or a physical thing is determined solely by what people are willing to pay for it at the moment of exchange. And that's it. I have a friend of mine who was outraged at my talk about IP because he says, look, it takes me like five years to come up with a new idea. You know? I mean, it takes me a very long time. So once I come up with it I should get paid for that idea. Well, why? I mean, who's going to say? Who's going to say for sure? It's the markets that have to determine this, and if you think that the market is going to pay a lot for your product, then you're willing to put a lot of time into developing it like a winery is willing to exist for 15 years because it's pretty sure that people are willing to buy this wine. But I'm sorry, if somebody spends 15 years developing a winery and at the end their wine tastes no good, then there's

56:22Nobody is not wrong somehow, it's not an injustice against the winery that nobody was willing to pay for their item. So in other words, uncertainty creates difficulties, there's nothing that can be sure. The trick of entrepreneurship and capitalism is that you want to somehow calibrate your investments with your expected rewards and it's always a speculation.

57:16It's tough because we live in a culture now in which IP is so prevalent. I'm not really kidding when I was talking about my daughter and her crazy scarf. This is part of the way The way people think now, they think that every new thing that's copied, they've been robbed of it. I recently read, and really all I'm saying to you is that it doesn't have to be this way. In other words, if you don't want your ideas robbed, there's a sure solution for that. Never tell them to anybody. Just keep them to yourself.

58:02And then you'll just be rich with your own ideas. and just have them and love them forever. But if you ever tell anybody, tell those ideas to anybody, you run the risk that if it's very valuable, it's now going to be public knowledge, especially in the digital age, everything flies around globally and instantly. Let me tell you something. I read this wonderful new biography of Ayn Rand by Jennifer Burns. Do you know Ayn Rand? She wrote this... So, a wonderful new biography, and Ayn Rand had a kind of problem. She was a brilliant thinker, but she was confused on the issue of intellectual property. I mean, so confused in fact that she thought it was more foundational to the idea of liberty than even physical property. Like, she thought that only ideas exist and like everything else was sort of irrelevant in a way. And nobody really corrected her on this. She used to welcome challenges to your ideas.

58:58But there wasn't anybody really around to explain to her what was wrong, and the fountain can be regarded as kind of a big story about IP, you know, the architect's IP was violated, you know, when they changed the design so therefore he can blow up the building. Now, of course, I don't mind that the building, there was a contract that it would not, okay. Okay, well there's a contract, also it was a public housing unit, so why do we care? But anyway, there was this underlying thing about IP in that book. But Rand had a problem because she wanted to convince other people of her ideas, but she believed she owned them. So it became very intense for her once she began to get followers. Okay, like how do you be a follower of Randian ideas? Really? How do you become a follower of Randian ideas?

59:50You know how it is in the music industry, if you take somebody's song and remix it, they get really annoyed, you know? So Rand really got annoyed when people would take her ideas and mix them with other ideas. She would only tolerate, you know, you could take her ideas as long as you took them in total and complete and didn't destroy the integrity of them. So you had to kind of like be a clone of her, exactly. And also, you had to constantly cite her, like, well, as Ayn Rand says, as Ayn Rand says, as Ayn Rand says, with every sentence. Now, if you've been around Randy in circles, you notice this propensity, you know? And I'm not saying that to criticize her followers. I think it follows from this fundamental mistake concerning IP. If you really believe in IP, the only way you can possibly have followers for your ideas is to insist that with every Every sentence another person utters, that they repeat what you said exactly and that

1:00:47they cite you precisely. It's the only real consistent way to believe in IP and also spread your ideas. The irony in Rand's case, of course, is that it was all being done in the name of individualism and creativity and living life as you saw it. The paradox is overwhelming in her case, you know, once believe in individualism and individual rights, on the other hand believe in her own intellectual property, and then also believe in that she wanted to influence the world. How do you reconcile these things? Well, I think she died somewhat despairing, you know, over this, over this problem, you know, of how do you, how do you deal with this, you know. But she did have this gatekeeper for a while, this Nathaniel Branden guy, you know, who'd actually like enforce this stuff. And if you called yourself an objectivist, you would get a letter from the lawyer, you know, telling yourself to stop him, and this This sort of thing. But again, I don't think this is malice on her part. I think it was

1:01:43just a mistake. The problem of IP, of intellectual property, is a persistent one. I think it's really prevalent today. If you look before the 16th century, throughout all of human history, I don't think you'll find a single other case in history where there was any kind of great conflicts over intellectual property. For example, music was not subject to copyright at all on the continent before the late 19th century. So it was very common for composers to borrow each other's melodies and you know they weren't mad about it. They were thrilled. Variations on a theme by Thomas Tallis, Bach writing themes on Vivaldi's themes that he heard just the day before, or taking books to Huda's compositions writing a dazzling new thing. They were flattered by this. To be copied is a compliment. That's the way In a way it was always regarded, same with literature. It was always true until this weird mercantilist idea of intellectual property came along in the 18th century, or really in the 17th century in England.

1:02:48The first country to copyright music was England, and it became very intense after about 1740. If you look back at music history, I don't know how much you know about classical music history, but there were very few composers in England after 1740 of any note whatsoever. Because if you can't learn from others, then you can't innovate yourself or make any useful innovations. Innovation requires learning. Development requires emulation. And if you make emulation illegal, you shut it all down. So that's the theme of my talk. Any other questions? Oh, come on. One more. We've got a few more minutes. No, we don't. Go ahead.

1:03:33I was going to say that, like, you said when patents are introduced, it kind of like stagnates the growth of innovation and stuff like that. Microsoft, for instance, has a ton of patents, yet every year they come out with more and more innovations in their software, in their operating system, in some of their hardware and stuff like that. Yeah, well you would get a lot of argument from people about whether or not they're really innovations, but it's certainly right that they're dedicated to consumer service and dedicated to improving their product. The industry is somewhat competitive because you've got the Mac OS out there that's making inroads. You've also got Linux operating systems, which everybody says you just download the Linux and you can do anything you can do on Microsoft.

1:04:19You face competition, and they also face competition with alternative pursuits other than being on the computer. So they have every incentive to make the computer ever better and better and better to keep people attached to the machines and using them. So I would say that the area of hardware and software is competitive, but it's not as competitive as it might be in the absence of patents. So that's how I would say that. And it used to be much more competitive back before the Federal Government decided that intellectual property applies as to computer code. And if you're a software developer, I don't know how many of you are looking forward to being a software developer, it's a very difficult industry now because you spend a vast amount of your time worrying about infringing on other people's intellectual property rights instead of doing things like learning and innovating.

1:05:09No, it's not allowed anymore. Now you have to navigate this minefield, you know, kind of walk through this ticket. and it's boring and it's tedious and it's bad for society. I think it's bad ultimately for the entrepreneurs themselves. Well, thank you very much for being such an attentive audience and please come by the Mises Institute. I would like to offer you two, not only for free download on the site, but we also have physical copies of a monograph that influenced me very much, Stefan Kinsella's Against Intellectual Property. He, for me, as the guy who opened my eyes, I tell you when he first wrote that essay, I read it six years ago and I thought, this is the most embarrassing thing I've ever read. It's absolutely wrong. And I was horrified that anybody could call for the repeal of intellectual property, repeal of copyright patents.

1:05:58I thought, this is crazy. Well, it took me six years to come around. It's an intellectual problem. And if you find anything I'm saying implausible, I would just suggest to you to give it time and think about it a little bit more. Look around the world, see if you can find examples of where absence of IP works and where presence of IP stagnates. and I think you'll see more and more examples and eventually come around to this position. Okay, thank you very much.