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The Columbia Law School professor Michael Heller is perhaps best known for his book The Gridlock Economy from 2008. A book which popularizes the concept of "tragedy of the anticommons". He summarizes the thesis in a speech at Google 2008 as "When too many people own pieces of the same thing, no one can use it".
Gridlock Economy
His works on the Gridlock Economy comes from the time when he was working for the World Bank on post socialist property in the aftermath of the fall of the Soviet Union. The state had little experience in private property and ended up in many cases dividing the property in too small and conflicting pieces for anyone to be able to use it.
He published his experiences in the 1997 article "The Tragedy of the Anticommons: Property in the Transiton from Marx to Markets". From this came 2008 the book The Gridlock Economy. Heller writes in the abstract to the 1997 article:
"When there are too many owners holding rights of exclusion, the resource is prone to underuse -- a tragedy of the anticommons. Anticommons property may appear whenever new property rights are being defined. For example in Moscow, multiple owners have been endowed initially with competing rights in each storefront, so no owner holds a useable bundle of rights and the store remains empty. Once an anticommons has emerged, collecting rights into private property bundles can be brutal and slow. This article explores the dynamics of anticommons property in transition economies, formalizes the empirical material in a property theory framework, and then shows how the idea of anticommons property can be a useful new tool for understanding a range of property puzzles."
Modern gridlock
To understand the concept of the tragedy of the anticommons one can think of a piece of land divided in to so small pieces that in order for any one person to farm one acre he would need permission from hundreds of property owners. The cost and effort needed to gather all of those property owners and negotiate agreements with each would take more time and cost more than what it would be worth farming the land. In the terms of Heller this would be the opposite of the tragedy of the commons where for instance a pond is fished dry of fish since there is no owner managing the fishing in the pond.
The effects of the gridlock can rarely be seen even though they might be most significant. The New Yorker puts it as that
...the effects of underuse created by too much ownership are often invisible. They’re mainly things that don’t happen: inventions that don’t get made, useful drugs that never get to market.
One of the clearest examples of tragedy of the anticommons today is patent gridlock. The fact that there is in a specific are so many patents that you can not in any meaningful way use the technology without infringing on potentially hundreds or thousands of patents. This could be the way with for instance mobile phones which might be covered by some 5000 patents or new drugs which could have similar patent thickets laid out.
A similar situation is present when it comes to the documentary series "Eyes on the prize" from the late 80s. Heller talks about that the series which portraits the African-American Civil Rights Movement to a large extent is built on archival footage and contemporary songs, met problems when it was to be broadcast again and also released on DVD since it was too costly to track down each rights holder to get permission for the new release. Further on this can be read here.
One way to get around these problems with too fragmented rights can be to pool the rights. This is commonly used for patents, where it for many products would be an impossible task to evaluate each patent and track down it's potential rights holder. Collection societies such as ASCAP and BMI can provide the same function for copyrighted works, for instance music played on the radio.
But as Michael Heller concludes in a Newsweek article we still have a big challenge in the gridlock economy.
A survey sponsored by the National Academy of Sciences found that scientists now routinely respond to gridlock by becoming patent pirates, just like students who illegally download music. Commercial drug developers, of course, cannot risk disregarding competitors' patents. Many of the world's leading drugmakers simply redirect investment toward less challenging areas and innovation quietly slips away. The dearth of new blockbuster drugs should prod Big Pharma off its longstanding position that the existing patent regime must be defended no matter what.
Commons and Anticommons
The ideas of commons and anticommons are not new and Michael Heller does not claim to have come up with the concepts, though he has coined the term "tragedy of the anticommons". It is in this rich idea tradition the newly published anthology "Commons and Anticommons" edited by Heller, takes an in depth approach trying to understand the relation between overuse and underuse of property.
Heller has collected 35 articles over a total of 1,192 pages in two volumes. Contributors ranging from Aristotle and Carl Shapiro to the 2009 Nobel laureate Elinor Ostrom and Michael Heller himself.
To me, the book's contribution lays in that it collects most of the relevant research on the tragedy of the commons and anticommons in one place and thus challenges the reader to understand the broader picture as well as the specifics of for instance spectrum allocation and the fishing industry.
Johan Orneblad
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Further resources
Audio and video
Authors@Google: Michael Heller on YouTube
Heller on Gridlock and the Tragedy of the Anticommons on Econtalk
Tragedies of the Gridlock Economy, an Economy Information Project conference on the Gridlock Economy hosted by George Mason University School of Law, with a discussion by Michael Heller and Richard Epstein. The conference is discussed here and some of the papers from the book Commons and Anticommons can also be found on the conference website.
Hearsay Culture interview with Michael Heller
Are patents and copyrights making innovation impossible? Out-Law Radio interview with Michael Heller
Books
Gridlock Economy on Amazon.com and Amazon.co.uk
Commons and Anticommons on Amazon.com and Amazon.co.uk
I have just read Chris Anderson’s book Free. Or to be fair, I did not actually read it. I downloaded it as a free audio book. One of the free versions of which you can reach the book Free.
Chris Anderson is, for those of you that do not know him, the author of the book The Long Tail and editor-in-chief of Wired Magazine.
Though Chris does not make any direct money on the audio book I consumed, he has a shortened (3h instead of 6h) version for sale. This is exactly his message in the book, that when the marginal cost of distribution reaches for zero, the prize will inevitably follow. This it at least true in the intangible economy where his two versions of audio books clearly show one of the several business models containing an element of free, which he lays out in the book. This model, freemium, is based on that you get something for free (the audio book) and you or someone else pays for a premium version (the shortened version).
The book Free also makes example of other ingredients in the complicated business model web. Since Chris is not only giving away the audio book, he is also giving away a pdf version, even though selling the paper book he must make money elsewhere. And yes he does, and do not make any secret of it either. One could almost see the whole book project as a conceptulizer and facilitator for his more lucrative business in selling his time. This through speeches or workshops for instance.
This brings us to one of the key factors in the (Anderson) Free model, except the zero marginal cost, the relation between scarcity and abundance. He argues that in a world, the intangible economy (or the economy of bits instead of the one of atoms), where the cost of producing one more copy of a specific product is almost none it will also be produced. So, this means that the seller has to find a business model where the scarcity comes in to play. Either if it is a constructed one as the premium service on for example FT.com or if it is the limited time of Chris Anderson.
What to learn from the book
I think the book has an interesting point in that we have to not just accept but to act on that free will be a key ingredient in many business models, and already is. This is especially interesting in relation to the new and emerging business models containing copyright, whether it is rights to music or to the written word, where I believe that the rights holders need to think hard on what they are selling. Is it a physical carrier of information or the information itself which is the valuable object?
The distinction between the physical carrier and the content becomes crucial in business model innovation and to actually see and construct the value proposition correctly to each group of customers, both in how if at all they should transfer money in return and also in what the product is and how it can be used.
Do I think you should read the book?
Well, Chris is sometimes repetitive and if you have the money but your time is limited, why not pay for the abbreviated version. The book has an interesting message and covers many innovative business models, which in themselves could be a reason to read it, but the main point might have been better off in a 30 page article.
In The New Yorker Malcolm Gladwell also writes about Anderson's Free and his conclusion is that not everything wants to be free. Chris Anderson responded to this in an interview with Charlie Rose (viewable online).
For those of you eager to know what he has to say, Chris Anderson gives an one hour presentation which is viewable through fora.tv.
[Update] Our Friend Anders Sundelin at TBMDB.com has written a post where he provides the full list of free bisiness models from the book.
[Update] For Swedish speakers, DN has written about the book here.
Johan Örneblad
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Trading TV Formats – The EBU Guide to the International Television Format Trade by Christoph Fey
The book is published by the European Broadcasting Union (EBU) in an attempt (I reckon) to somewhat formalize and establish best practices for a trade, which almost dates back as early as the first TV programs. But it is as vital as ever, with international format licenses on smash hits such as “Survivor” and “Who wants to be a millionaire?”. The international format business is worth some €2.4bn.
The book
It is outlined in three distinct parts with the aim to help licensors in packaging and pitching their ideas to producers or broadcasters. The parts cover how to package a format, how to protect the format, and an overview of several different court cases.
The part that deal with the package and how to strategically arrange for the license deal is quite hands on with straight on suggestions for clause constructions. It also discusses hoe to relate to the IP in the deal, both so you do not transfer more than you intended but also from a protective perspective.
The part on protection provides a good overview over issues to be thought of not to unintentionally let go of your potentially valuable asset.
Takeouts
The part of the book which I found most interesting is the one that discusses the rights of the buyer; what is it he is licensing? It all comes down to the issue of that TV formats as such is an unknown concept for copyright legislation. There have however been attempts to actually award the creator of a format some sort of protection for her work. Either if this is through copyright or through different types of unfair competition legislation.
To me the issue of TV format protection shows the sometimes inaccurate or at least inflexible way IP legislation can behave. Formats have been licensed for half a decade with, I guess, quite good rate of success. But the more valuable the formats become, both in themselves for TV production but also for external merchandizing, the greater efforts are taken to circumvent the established practices. One other factor might be that the TV broadcaster market have gone from almost only state owned public service companies to a greater breath in broadcasters today.
I think this is an interesting area and will get back to it here at Intangitopia in the future. Especially since it in such clear way shows many of the interesting characteristics of IP; intangible but defined by a tangible transactional object (compare the “Format Bible” to a patent for instance), value driven by transactions and transactional structures can be custom made in almost any way.
Johan Örneblad
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I thought that it would be nice to provide some variation to Intangitopia by recommending a book that I read recently. The recently published book is called The Invisible Edge- taking your strategy to the next level using intellectual property.
Background
Intellectual assets and IP are traditionally not discussed in the boardroom as the core to business strategies in the way it really ought to be discussed. This is true both for many industries/companies as well as for many of the US top business schools. Too often, business managers think of IP as a problem for the patent lawyer to deal with, or that it only applies to particular industries such as entertainment, software and pharmaceuticals. The authors argue that IP instead should become your number one priority and be the core of your strategy (which may be compared to one of the older posts here at Intangitopia).
Zooming as a Concept
The book introduces the concept of “zooming” where the analogy of using different “lenses” allows you to see different dimensions of your strategy. Using this concept allows you to look at specific cases from several perspectives, and is also something that we recently utilized at Intangitopia in a post to visualize value extraction in Agribusiness. The IBM PC is used as one of the examples in the book. IBM’s strategy is argued to be perceived as an innovation success on a high-level (“architecture level”), whereas it is obvious that a zoomed-in picture (“component level”) reveals details that show a platform where control (and market share) is gradually lost to become cloned and flooded by competitors making implementation on a detailed level less successful.
The book provides some really interesting examples of “zooming” where one starts at the level of competition between nations only to gradually zoom in to company competition, networks of inventions/developers, technology inter-dependency, patent rights and claims thereof.
Control - Collaborate - Simplify
Another simple, but yet elegant, concept that the book presents is: control-collaborate-simplify. This is more of a holistic framework of the dimensions of IP rather than a readily applicable tool. The model describes the exclusionary role (control) of IP that still is the focus of many firms versus the newer phenomena of openness and co-creation (collaborate), and how these concepts can be packaged and shaped (simplify) using ingenious designs, setting standards and architectural thinking into logical/intuitive models that will be the factor that “wins over the market”.
Case Studies
The book presents a wealth of studies ranging from the steam engine to golfballs, razors, computers, patent trolls, as well as IP strategies for Lenovo, Qualcomm, Xerox, Toyota and Boeing among others.
About the Authors
Mark Blaxill and Ralph Eckhardt are managing partners of 3LP Advisors. Blaxill is a former senior vice president of The Boston Consulting Group (BCG) and was head of its Strategy Practice Initiative. Eckhardt is the former head of BCG’s intellectual property strategy practice. More about the authors here.
Conclusions
The book is very inspiring and is an exceptional read for anyone who is new to the IP world and would like to understand its importance in relation to business strategy and the new economy. Personally, I enjoy case studies and therefore find the book to be really useful to see what strategies that have worked or failed in the past. One of the best things about the book is that it is written in a way that is easy to communicate to non-lawyers, meaning that it provides a good tool when looking for examples to describe why a client should worry about their IP strategy or why patenting should be a boardroom decision. The only negative aspect that I found about the book is that I would like to have seen more detailed frameworks, models and checklists for successful implementation of IP strategy, and I really hope that there will be a more advanced second book in the future where more hands-on advice is provided. I do realize however that the contextual nature of IP makes drafting of general widely applicable frameworks extremely difficult. Nonetheless, I enoyed the book and I recommend reading it.
Tobias Thornblad
(Follow me on Twitter)
Get the book here
More information:
Forbes: IP Is Now Job One For Every Senior Executive
IP Think Tank Podcast: interview with the authors here
IP Finance: Anther book review here
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