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Introduction

Intellectual property rights in general and patents in particular are monopoly rights under a disguise. For the sake of encouraging innovation and the communication of ideas, society grants exclusive exploitation rights to the company or individual holding the patent, therefore making patents a very effective way for big business to circumvent anti-monopoly legislation.

The justification for inventing the concept of patents in the first place was this one: we wanted to support innovation, so we wanted to reward inventors, and for this we accepted a temporary monopoly in return for sharing the idea (when a patent is filed, the idea is published) and for giving it away (after a 20-year period, the idea goes into the public domain). Obviously, this scheme is more beneficial for society than an absence of protection, which would result in either discouraging inventors, or at least in making inventors keep most inventions secret. When the inventor dies, the idea is lost.

Essentially, it is the general public, or more specifically the customer, who pays for the idea: because of the exclusive exploitation rights granted to the holder of the patent, the product is sold with a higher commercial margin. The good side for the customer is that he/she only has to pay for successful ideas. The ideas which do not make it into a successful product will not generate revenue for the inventors: it is as if these unsuccessful ideas had been ‘given away’ with simply a 20-year delay.

Monopoly is not the only solution

But granting monopoly rights over an idea is not the only way we could encourage ideas. There are at least two other ways.

The first alternative is public research. We do not call them inventors, but I am certain that publicly-funded research scientists are contributing far more efficiently to the world of ideas and innovation than corporations. As soon as they are published, new scientific discoveries enrich the public domain, and they often lead to successful commercial applications from companies who file patents based on industrial applications of free, public-domain ideas.

The second alternative is preemption: society (represented by a government, a patent office, an association, etc.) could buy an idea upfront when the applicant files for a patent. The deal could be the following: how much do you want society to give you (the inventor) in exchange for giving the idea away? This is exactly what big corporations do when they buy patents from private inventors or small businesses. The main difference is that society, now holder of the patent, would choose to give away the idea. The net result is that the inventor has received the same reward, but the general public gets the benefit of the idea for a fraction of the price.

Free ideas have more value than commercial ones

You could argue that 20 years is not long when we consider really really good ideas like the wheel, the bicycle or semiconductors. So why I am so keen on seeing innovation make its way into the public domain as fast as possible?

The first reason is that there is a very stiff threshold effect between something free and something we have to pay for. If I tell you I have an idea which might make your day or even make you rich, but that you have to pay me 10$ first, you would certainly decline the offer. And even if I told you the idea first, and then told you you had to pay 10$ to use it, you would probably decide to try to find another way of doing the same thing rather than pay me the 10$, even though the extra effort you put into it would probably greatly exceed the 10$ mark. Maybe if I had asked you only 1$ or 1c, you would not have been so strong-headed. But if I had given the idea for free, then I am quite sure you would have taken it at once. Or even better: you would have improved on it and probably shared your new idea for free.

This leads to the second reason why I think ideas should all be free: many ideas are just marginally good ideas until they meet a host of other ideas and they can make a fantastic whole. To make a good bicycle, you need the wheel, you need cable spokes, tires, sprockets, ball bearings, a fork with trail, a diamond frame, hollow tubes, welding, light alloys, pedals, cranks, gears, a drive-chain, a derailleur. Each of these is a patentable idea in itself. Imagine you wanted to invent the bicycle and had to pay for all of these but did not know whether you’d sell three or ten, or maybe a hundred bicycles (how could you predict it was going to be the single greatest revolution in human transportation after the wheel?), you would have been stuck.

Ideas have to circulate, they have to meet, exchange, improve each other, talk together, fight. The more barriers between them, the harder it is for them to grow into really great improvements.

Legal costs of enforcing a stupid system

Now imagine I had told you a really good idea for making butter, and then asked 10$ in case you wanted to use the process. You could very well say no thanks and use the idea nonetheless, as no-one would know how you make your butter. Once disclosed, ideas can never be taken back. Therefore it takes a lot of effort to consider ideas like solid objects that can be traded, sold, and taken back.

It is a bit like giving you a chair for free, allowing you to take it home, but asking you 10$ for each time you actually sat on it. I would have to plant cameras in your home (or a pressure detector in the chair) to know whether you were using the chair or not. But that would be a violation of privacy, so I would need to go to the courts and get a legal action started if I wanted to go that way.

Ideas are not solid objects that we can apply the standard commercial business model to. Just like digital music, when one wants to go against the laws of physics (I cannot prevent you from copying a file when I want you to be able to download it for listening, and I cannot physically take back an idea I have disclosed), one has to spend considerable effort on legal aspects. And each time, there is no benefit for society, only lawyers get richer.

A few examples of the costs related to forcing ideas into an inadequate model:

• because patents are a property right, the text must be absolutely unambiguous and must follow a very strict pattern, by law. When I could simply publish my idea in a few lines so that my colleagues and competitors worldwide would understand what it is, I have to spend ten times the effort and force the idea into a very awkward mold of matryoshka-doll-like claims, with very awkward language so I leave as few cracks as possible for the competition to break it or find a workaround.
• because patents are a monopoly right, they are a key element in failing to find commercial agreements. The question of what party will become proprietor of whatever innovations result from a given joint project is so important that we are seeing more and more projects delayed or even dropped because both parties could not find an agreement over the corresponding contract clauses. Instead of encouraging innovation, patent laws are in fact holding collaboration back. When you know how much collaboration can boost innovation, you understand that intellectual property becomes clearly counter-productive in those cases.
• because ideas should never be disclosed outside of the patenting process (otherwise the patent is not valid) and because the patenting process is so long (up to several years), we are stuck in the development of a great new idea: we need external funding to proceed, but we can hardly communicate what it is we want funding for. And even if we can communicate, we are asking funding while telling at the same time that we will have exclusivity. I do not know many customers who would love such a bargain.
• legal battles over a patent result in so much legal costs that any commercial profits from the exploitation of the patent would be nulled. Big corporations know it. This is why they favor quantity over quality: nobody will dare to question the validity of 1000 patents. Between them, big corporations merely count patents and mutual patent violations, and they generally do not go to full-fledged legal action. But against smaller businesses, they do not hesitate to unleash the steam-roller.

Costs of monopoly

As mentioned above, legal costs are so high that nobody really dares to question patents. Therefore, big corporations with a lot of cash, a large patent portfolio, and an intimidating team of IPR lawyers can essentially claim monopoly over almost anything and kill off weaker competitors by simply raising the fist of their intellectual property rights.

As they get more powerful and richer, they start intense lobbying in favour of extending intellectual property rights:

• in scope (patenting living things, patenting exotic medicinal plants that aboriginal healers have always used but never published about, patenting genome,…)
• in time (there is intense lobbying from big pharmaceutical firms to extend patent monopoly from twenty years to fifty or seventy years, with the justification of long time-to-market for new molecules)

As they can keep their monopoly only by renewing their patent portfolio, they start a runaway race for innovation. Innovation for the sake of monopoly, not for the sake of any true advantage to the general public. And to make sure the general public runs along, they start spending the monopoly money on advertising. By endlessly fueling our frustration and making stuff with the new patented gizmo appear so much more desirable than the stuff we just bought, advertising contributes to the general dissatisfaction while it feeds landfills. Therefore, not only do we have to pay more for some innovation because it is patented, but as it is an innovation we do not really need, we pay even more for the advertising which frustrates us into buying it; and a little extra for resource depletion and pollution.

Just give

We should just give our ideas away. After all, an idea is the least costly and the most valuable gift.

I will write soon why I even think there is a business model for open-source industrial innovation just like there is one for open-source software. Stay tuned.

When you google 'Airbus Boeing Peak Oil', the top result is this article that I wrote in the summer of 2006. Being a Cassandra proved right gives one all sorts of uneasy feelings, but I will carry on in that direction and offer a revised version of my prophecy, adorned with new details.

In a nutshell: people are talking a lot about the difficulties for airlines with $150-a-barrel oil. But we also have to understand that it is going to be much worse for aircraft manufacturers. They probably know it; but they cannot believe what they know, and they cannot say it either. This is not just another crisis for air transportation and aerospace construction: this is the last crisis until the end of the fossil fuel era.

Hard times for airlines

First an important premise: there are no serious alternatives to jet fuel for airliners. And even if there were, they could never be cheap in a world of expensive energy. The problem is not that oil is scarce: the production has never been this high — that's why we call it Peak Oil. The problem is that energy supply is not meeting global demand: until demand abates, any type of energy will end up costing the same, be it classical kerosene, gas-to-liquid synthetic jet fuel, or biodiesel. Regardless of the environmental footprint. Just know that if it was technologically feasible, filling an A380 tank with biofuel would use up 150 hectares of yearly yield,considering an optimistic figure of 2000 litres per hectare for Jatropha biodiesel. You'd need 150×2x365×150 = 16 million hectares — the arable land in France — to power the currently ordered A380 fleet.

Meanwhile the fuel efficiency improvements do not come anywhere close to compensating the price surge. Boeing claim that their new 787 will burn 20% less fuel than current jets of the same category (namely the 767 or A330). 20% is how much oil prices rose between the beginning of April and mid-May 2008: 30 years of technological improvement in aircraft and engine design will offset six weeks of price increase, and no technological Deus ex Machina will change that deal.

The obvious consequence is that cheap flights are gone for good. We are currently witnessing a fast concentration of the market, because the fierce competition prevents airlines from transferring the whole fuel bill to their passengers. As the weaker players exit the arena, ticket prices will rise until the few remaining airlines can break even financially. We will see a trend of de-democratization of air travel, and people will gradually change their travel habits, starting with the poorer and newer travelers.

There is a second key element that will drive air traffic down: as planemakers' market forecasts point out, air traffic growth is consistently correlated to world GDP growth. No need to be a psychic to imagine that GDP growth will seriously suffer from expensive energy. When people's purchasing power shrinks because of the energy bill, they will think twice before flying. Note that a major economic downturn could very well stop the rise in oil prices or even reduce them for a while. But it will not help air traffic - unemployed people do not fly all that much.

Meanwhile, environmental awareness is growing worldwide: the global warming theme is increasingly popular with the sort of middle class travelers who used to fill economy seats for exotic vacations. There will be less scuba-diving in the Maldives; less horseback-trekking in Mongolia; less leopard-spotting in Tanzania. Flying is losing political correctness points by the day. This is even beginning to reach the corporate world, although sometimes only for mere greenwashing concerns: more firms are asking their employees to fly less, to favor teleconferencing or to merge meetings. Business travel, the spine of airline profitability, is probably weaker than most hope.

I also see a final, more tricky contributor to airline misfortunes: many airlines have based their financial model upon the resell value of their aircraft. Planes are a huge investment, with a long lifetime — a bit like homes. Maybe you see what I am hinting at. Just as the housing crisis brought many people to bankruptcy, many airlines will lose their financial footing when the industry's obvious overcapacity and gloomy outlook pulls the market value of second-hand aircraft down. All this will contribute to reduce air traffic over the next decades, to the levels of the 1990s, then the 1980s, then the 1970s …

Harder still for aircraft manufacturers

The average natural decay of a fleet because of ageing is around 6% a year. When yearly traffic is constant from one year to the next, 6 planes for every 100 go into retirement, and are replaced by newer planes. This means that if airlines cut the world's capacity by a mere 6% each year, old retiring planes will not need to be replaced, and no new aircraft will be sold at all. A 6% capacity reduction is equivalent to just changing the Tuesday flight of the daily San Francisco to Tokyo service from a 747-400 to a 777-300ER. A reduction the economic press or the general public would hardly notice can make Airbus and Boeing assembly lines grind to a halt. US carriers will reduce capacity by 10% to 15% this third quarter of 2008 alone.

All told, the industry will cut capacity by 9% in 2008, according to James Higgins, analyst for Soleil-Solebury Research. (quote from CNNmoney.com)

In short: airlines make money in proportion to air traffic; aircraft manufacturers make money in proportion to air traffic growth. In a world with negative air traffic growth, the former float, the latter drown. Therefore, although we will probably not see the end of air traffic any time soon, this extremely nasty leverage effect will make aircraft manufacturers suffer considerably.

One might argue that in a world of expensive oil, airlines should scrap all old, gas-guzzling planes and buy new, soberer ones instead. That would be easy if they were making a lot of profit or could promise a bright future. But when the industry is consistently in the red zone, and getting redder, bankers do not follow. Few airlines have sufficient cash to sign billion-dollar contracts without external investment. Therefore airlines will be like people in poor countries: they will be running old vehicles which use up tons of gas because they cannot afford the newer models which make twice the miles per gallon.

Admittedly, a handful of airlines will be in a position to buy the new planes. When all the world's money ends up in oil exporters' hands, they have to buy things from us to avoid drowning under the heap of green bills. Aircraft are a great choice, as they are both hard-currency-intensive and fossil-fuel intensive, which oil producers have a lot of, as per design. Consequently, aircraft sales may in fact undergo an increase because of high oil prices. This I call the "Aboulafia effect". I conjecture that such an increase is inherently short-lived. Middle-East carriers will probably become prominent players, and gradually snatch the bulk of the market from the traditional airlines. But air traffic will shrink nonetheless, and all they will need to do is buy back the recent planes from their victims, scrap the old ones, and make the most of a declining market — something they are becoming good at.

As if matters could be any worse, there will finally be a mean backlash effect: thanks to cheap liquidity seeking asylum, the years 2003-2007 were absolutely euphoric in terms of aircraft orders. Manufacturers had to invest massively in infrastructures and people in order to ramp up production and honor those orders. But these planes will not materialize into deliveries before a couple of years. There is plenty of time for many airlines to go bankrupt or otherwise hit financial turbulence. This will mean massive delivery deferrals, then cancellations, so that assembly lines cannot even hold onto their current backlog. Who knows, we may witness the very curious artefact of a negative net yearly order-book. In the real world, that's called jumping off a cliff with a lot of momentum.

The combined value of the orders for Airbus and Boeing planes exceeds $500 billion at list prices, so large-scale cancellations and deferrals could easily amount to tens of billions of dollars and affect suppliers of engines and other parts in addition to the jet makers. (from the Wall Street Journal)

What next?

When that happens, it will be catastrophic for all the people, organisations, or communities, which now contribute to the aircraft manufacturing adventure. This could send Seattle or Toulouse the way British textile, or French foundries went not so long ago. And do not get influenced by prejudice. Aerospace does not have an intrinsically higher value than those industries we have come to regard as lowly. Today's ghost slums were full of very busy and extremely proud people at the peak of their flourishing trade.

I do not know what the smartest move for aircraft manufacturers is, and I am glad I am not in Tom Enders' or Scott Carson's shoes. Publicly acknowledging that the air travel industry is on the brink of inevitable decline would discourage investors and hasten the fall. And yet, the earlier they can start downshifting, the smoother the forced landing. They should be cancelling the B787 (a little too late for that one) or A350 developments, and simply offer to fit new generation engines on good old 767s and A330s. That would already be at least half the fuel economy, for a much smaller cost, while not forcing new capacity on the market place. Or silently work on a totally new kind of bird, absolutely optimized for fuel efficiency, even if it changes the rules of the game: a Mach 0.62, 20,000ft, turboprop, middle-range, high-capacity, DC-4-comfort machine that would be the soberest flying camel to get people where trains can't go for the next half century.

Or maybe steer away from this dwindling trade altogether and find a new frontier. How about giant wind turbines? If those do not sell, nothing will anyway, so that may be worth a try.

Notes

Many thanks to Richard Heinberg and Julian Darley of the Post Carbon Institute for accepting publication at Global Public Media.

Requests for reproduction or translation should be sent to the Post Carbon Institute.

Barter vs. gift

We often think that when currency did not exist, most societies relied on barter for economic exchange. This is the main argument in favor of the use of money, which essentially allows to delay both halves of barter by materializing debt. In a barter economy, you can only trade what you have, whereas with currency, you can trade what you will (probably) have later.

When the seller (or the lender) realizes later that you cannot in fact honor the debt, then you get a financial crisis, in which everybody starts to question the value of everybody else’s debt (i.e. money loses its value), therefore nobody wants to sell or lend (i.e. accept someone’s debt as payment), therefore many people stop working (nothing to sell), therefore economy grinds to a halt.

But this is not true. Barter may have been the rule for merchant trade (i.e. rare and foreign stuff like beads, salt, silk, spice, etc.), but for daily economic exchange, barter was the exception and gift was the rule.

Somehow, we have been brainwashed into believing that any exchange should be reciprocal. But we must not look very far to find perfect examples of a gift behaviour which is as old as life itself: one expects no quid pro quo when one raises a child or takes care of a family. Obviously we do not ask a newborn baby to give something or do something special in return for nursing or shelter. We do not ask a newborn baby to sign a debt certificate. It is true that some parents have great expectations (you’ll be a famous lawyer, my son), but most parents only want the best for their kids, regardless of what the kids will do to them in the future.

Savings and credit

Savings (and then credit) is what you have when you have worked more than what it takes to fulfill your short-term needs (or wants). You can either stash this surplus as hard goods, like a squirrel hides nuts, but most people hoard it as money (or investment). Money (or invested capital) is someone else’s debt. When an insane economy forces goods onto impoverished people in exchange for debt, and then realises that the debt cannot be honored, then people’s savings are hit. Your surplus has melted just like hazelnuts can rot. It seems fair enough, but the crisis goes far beyond simply telling the rich that their surplus has vanished (bummer). And the poor are also hit, first when they get squeezed (e.g. evicted) so that creditors can get crumbs back, then when the economy slows down and they lose their jobs.

What if I had just given my surplus away?

Now imagine we have our brains intact and can live in an economy when we never expect anything in return. If I have surplus, I will give it away, for whatever I feel deserves it best. I will probably think twice before giving my surplus to the rich and old, and instead, it will feel natural to give it to the young (and generally poor), especially if someone had done the same for me when I was young and poor myself.

I do not expect anything in return, I do not think of the surplus as mine and to be returned one day; therefore, there cannot be a financial crisis. But society does get the full benefit of this ‘investment’ in any case, and I will get my interest directly through social recognition (there were rich people before money existed), and obviously indirectly via the healthy society I contributed to.

Note that the people who get gifts from me, even repeatedly, should not consider that they owe me anything nor feel uncomfortable in any way as a consequence of my largesse. In today’s world, only children can do that well.

If you think hard enough, there is no more nor less ‘justice’ in this system than the current one. But it is more robust, and certainly more humane. Probably, a gift economy does not work when you do not know the people. Instead of seeing it as an obstacle against my utopia, I see it as a good reason to get to know my neighbours and make tons of friends on the web. Who knows, maybe I will have to give something to you one day.

Epilogue

We have a saying in France, which goes like this: “Les bons comptes font les bons amis”, which means “Good accounts make good friends”. My personal belief is that “Les bons comptes font les bons comptables, c’est tout”: “Good accounts make good accountants, period”.

The factory has admittedly greatly increased the creature comfort of mankind. Innumerable articles now in general use were luxuries enjoyed only by the gentry and quite above the aspirations of common folk before the factory system was established. The factory has enabled the masses to live under conditions, and to consume “goods, wares and utensils,” which otherwise they could not have afforded. Rich and poor both have been enabled to purchase more goods and more kinds of goods and to consume and destroy them more freely than was previously possible.

It is, of course, difficult to determine how much of the credit for all this is really due to the factory itself and how much to the fact that scientists and inventors directed their efforts to the development of factory machinery and factory methods to the neglect of improvements in domestic production. We have always to bear in mind that the well-being we credit to the factory is based upon comparison between the low prices and high consumption made possible by the factory after it has had the advantage of all the inventions and the increases in scientific knowledge of the past century and a half, and the high prices and low consumption which prevailed under a relatively primitive system of individual production.

in This Ugly Civilization, Ralph Borsodi, 1930

And he’s been proven right in at least one respect: personal computers completely wiped out mainframe computing. I am ready to wager that there are tons of other examples where we believe a centralized model is more efficient when in fact it is not.

Through the very excellent soil and health library website, I have discovered a fascinating author, tackling the contradictions of our industrial model 80 years ago, and forty years before Ivan Illich.

This author is Ralph Borsodi, and his social and economic insight is very sharp ; extremely sharp when you think that he had come to his conclusions in the 1920s.

I will be telling more about the author as I carry on reading his works, and there will be several quotes finding their way into my blog, for there are views I could not express better.

[…] the idea that mankind’s comfort is dependent upon an unending increase in production is a fallacy.

It is more nearly true to say that happiness is dependent not on producing as much as possible but on producing as little as possible. Comfort and understanding are dependent upon producing only so much as is compatible with the enjoyment of the superior life. Producing more than this involves a waste of mankind’s most precious possessions. It involves a waste of the only two things which man should really conserve–the two things which he should use with real intelligence and only for what really conduces to his comfort. When he destroys these two things, he has destroyed what is for all practical purposes irreplaceable. These two things are the natural resources of the earth and the time which he has to spend in the enjoyment of them.

in This Ugly Civilization, Ralph Borsodi, 1930

I get angry when I see theories and schemes which do not acknowledge failure and justify an eternally delayed success by trying to turn the guilt on me. They tell me that I did not try enough, that it will work only if I do more, that if I do not do exactly as they say, if I make but one false step, it will fail and be worse than if I had done nothing. These are totalitarian theories. Generally, they do not deliver.

Below is a list of such theories, which have consistently failed in the past but keep asking us for more:

• capitalism will reduce poverty
• communism will improve people’s lives
• GMs will feed the third world
• preventive war will stop terrorism
• increasing agricultural yields will abolish hunger
• vaccines will eradicate infectious disease
• the telethon will find a cure against myopathy
• science is good

If you look around, you can find such theories by the dozen. They always have the same modus operandi: an unchallengeable basis relying on circular logic, unquestionable dogma or good intentions. Let us quickly flip through the list above. [more]

A car is faster than a bike. At least, that’s what we all believe. But in fact, it is false. We already know that in congested downtown traffic a car is hardly faster than a bike, but I am saying that riding is faster than driving — always [more]

The definition of work in our complex economic world is difficult to establish, biased by cultural prejudice and the effects of money. Let us go back to basics with my reductionist model. Imagine a fictitious tribe of prehistoric humans, with little specialization and no currency. Let us try to sort their activities between what was work and what was not:

• Hunting and gathering: work
• Knapping flint tools: work
• Hut building: work
• Ritual dancing: not work
• Cave decorating: not work
• Bathing: not work
• Making love: not work
• Sleeping: not work
• Eating: not work
• Standing guard: work

From the above classification, I could try the following definition: work is any activity that is necessary for survival and that involves unpleasant effort.

It seems fair enough, and yet, even in a very primitive society, I can find activities that fit the definition and yet can hardly be considered work: [more]

Believe it or not, school is a very egalitarian system.
However elitist a given school may be, kids with better grades do not have fancier uniforms, they do not eat nicer food at school lunches, they do not get better chairs in classrooms or better spots in the schoolyards. This absence of objective short-term reward in return for a learning effort is probably why so few schoolkids are eager to learn more and better. This is totally rational: if there is no reward, why bother. If you do, you are stupid and are treated as such. School excellence is frowned upon by popular kids, and bland mediocrity is the golden standard if one wants to get respect from one’s teenage peers.

In addition, this egalitarian system gives kids the wrong idea about society: when they leave school, they will be totally inadapted to today’s economic system when one does not get anything for nothing. Unless one strives to be among the best, one is gradually sucked down into the economic drain. The sooner they learn this sad truth, the better armed they will be.
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Piracy is theft: now and then, when I watch a DVD, instead of the typical legal warning text, I have to watch a complete video sequence involving people stealing cars, purses, and other objects, and the ending shot is someone downloading something from the internet, with a vibrating slogan in large red letters: Piracy is Theft. I say no. Piracy is piracy, theft is theft, and it is not up to Sony Music or Warner Home Video to brainwash me into redefining what theft is.

What is theft?

I believe that ever since the concept of property has germinated inside the narrow conscience of a pervert Homo not-so-Sapiens (germination accurately captured by Jean-Jacques Rousseau in Discours sur l’origine et les fondements de l’inégalité parmi les hommes), theft has always been two inseparable things: the victim is deprived of something he/she has worked for, while the thief obtains something without having worked for it. Prejudice for the victim, benefit for the thief. Which one is more important?

I frankly doubt we would consider theft the same way today if historically it had not deprived the victims of their property. If people could still use their stuff after it had been stolen, I doubt they would even contemplate filing a complaint with the police.

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