Alex Tabarrok, author of the ebook Launching The Innovation Renaissance: A New Path to Bring Smart Ideas to Market Fast discusses America’s declining growth rate in total factor productivity, what this means for the future of innovation, and what can be done to improve the situation.
Accroding to Tabarrok, patents, which were designed to promote the progress of science and the useful arts, have instead become weapons in a war for competitive advantage with innovation as collateral damage. College, once a foundation for innovation, has been oversold. And regulations, passed with the best of intentions, have spread like kudzu and now impede progress to everyone’s detriment. Tabarrok outs forth simple reforms in each of these areas and also explains the role immigration plays in innovation and national productivity.
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Paul J. Heald, professor of law at the University of Illinois Urbana-Champaign, discusses his new paper “Do Bad Things Happen When Works Enter the Public Domain? Empirical Tests of Copyright Term Extension.”
The international debate over copyright term extension for existing works turns on the validity of three empirical assertions about what happens to works when they fall into the public domain. Heald discusses a study he carried out with Christopher Buccafusco that found that all three assertions are suspect. In the study, they show that audio books made from public domain bestsellers are significantly more available than those made from copyrighted bestsellers. They also demonstrate that recordings of public domain and copyrighted books are of equal quality.
Since copyrighted works will once again begin to fall into the public domain starting in 2018, Heald says, it’s likely that content owners will ask Congress for yet another term extension. He argues that his empirical findings suggest it should not be granted.
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Ronald A. Cass, Dean Emeritus of Boston University School of Law, discusses his new book, Laws of Creation: Property Rights in the World of Ideas, which he co-authored with Boston University colleague Keith Hylton. Written as a primer for understanding intellectual property law and a defense of intellectual property, Laws of Creation explains the basis of IP and its justification.
According to Cass, not all would-be reformers share a similar guiding philosophy, distinguishing between those who support property rights but nevertheless have specific critiques of the intellectual property system as it currently stands, and reformers who do not see a place for property.
Cass explains that the current intellectual property system is neither wholly good nor wholly bad, but is a matter of weighing tradeoffs. On the whole, he argues, intellectual property benefits society. Cass also argues that intellectual property law in the U.S. is still more functional than that in other countries, such as Italy, and that, while it would benefit from some reform, it is fundamentally a workable system.
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I’ve noted that Google and Microsoft both face what Clayton Christensen famously called the “Innovator’s Dilemma” in trying to handle disruptive innovation in search technology. But noting Microsoft’s innovations in bringing social functionality to search with its “Ping” tools in Bing, I pointed out a few days ago that, “Microsoft, with less to lose and without a huge installed user base to worry about annoying by violating Google’s ‘Prime Directive’ of elegant simplicity, may have an easier time introducing ‘disruptive’ innovations to search than Google.”
The trick will be for Microsoft to find ways of promoting radical innovation from inside, despite the forces of inertia inherent in any large company. One way to do that, as I noted, would be by imitating Google’s “20 percent” program. But a more radical way would be for Microsoft to make Bing a “skunkworks” much like Lockheed Martin’s original “skunkworks,” Xerox’s Palo Alto Research Center (PARC), AT&T’s Bell Labs, GM’s Saturn Motors—or Microsoft’s own XBox. That’s precisely what SEO guru Rand Fishkin (CEO of SEOmoz) suggests Microsoft needs to do to “get serious” in an interview with Affilorama:
I think Google[‘s search market share] could be reduced from like 85% to like 75%, and you could see Microsoft, basically Bing taking over 25%. I don’t think they’ll get more than that. I don’t think they have the ability to do it. Until or unless they are willing do with Bing what they did with Xbox.
So Microsoft had, you know, the game market was well established – Sony competing head to head with Nintendo and other players like Neo Geo coming in and this kind of thing and how is Microsoft going to win this? They didn’t know the first thing about it, you know, they weren’t in this field. So what they did with XBox is they
made it a startup. They didn’t even put it on Microsoft campus, they made it a different team of people who were only reporting to Xbox people, they basically built a separate company. The fact that it was owned by Microsoft just means that they get the benefits of the cash and the relationships. That’s extremely powerful. The fact that they’re unwilling to do this with search tells me they’re not serious about it. Right? So you might hear like Steve Balmer and other executives from Microsoft say like “search is very important to us, we’re really serious about it”. I think it’s like “serious to them” and I’m using air quotes here, like serious to them in the same way that Google says “competing with Microsoft Office is serious to us”. It’s just sort of like, “Oh yeah?! You’re going to fight us there, well we’re going to fight you on this front!” Like, serious my ass. I just don’t see it.
If they do serious and spin it out, I’ll be interested – I’ll be very interested if it becomes it’s own startup if it becomes like its own XBox, that kind of thing, that could be exciting – that could be interesting.
Microsoft is making a major push to integrate social networking tools like Facebook and Twitter into its Bing search engine: users will soon be able to “Ping” search results they like to their friends directly from Bing. Back in January, in “Google, the Innovator’s Dilemma and the Future of Search & Web Ads,” I talked about the implications of this history of search from the WSJ):
Microsoft missed its opportunities to get into paid search not because it was “dumb,” “uninnovative” or a “bad” company, but for the same sorts of reasons that big, highly successful and even particularly innovative companies fail. The reasons companies generally succeed in mastering “adaptive” innovation of the technologies behind their established business models are the very reasons why such great companies struggle to encourage or channel the “disruptive” innovation that renders their core technologies and business models obsolete. This dynamic was described brilliantly in Harvard Business School professor Clayton Christensen’s classic 1997 book The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail…
Let’s hope that Microsoft—as well as Yahoo!—have carefully studied the vast literature produced by business schools in the wake of Christensen’s book about how big companies can avoid the Innovator’s Dilemma by promoting—and capitalizing on—radical innovation from within. Indeed, this seems to be precisely what has guided Google’s own strategy as it has grown from “disruptive innovator” to become the very sort of behemoth that cannot easily escape the Dilemma, even if corporate managers are fully aware of the problem on a theoretical level. If Google can do it, Microsoft should be able to, too. But let’s also not discount the possibility that, no matter how hard Google’s management might try to retain the innovative culture of a start-up, the giant
can’t do that well enough to prevent its own apparent market dominance from being disrupted by new upstart innovators in search and advertising technologies.
My prediction seems to be coming true: Microsoft, with less to lose and without a huge installed user base to worry about annoying by violating Google’s “Prime Directive” of elegant simplicity, may have an easier time introducing “disruptive” innovations to search than Google. Of course, it’s unlikely that any
one feature will prove the “killer app” that suddenly causes Bing’s market share to explode—and Google’s to plummet—but a steady stream of such nifty features could convince many users to switch to Bing.
At 29, I’m old enough to remember when Microsoft seemed as cool as Google does today. Hell, I remember being thrilled as a sophomore in high school by Bill Gates’ 1995 book
The Road Ahead and the accompanying CD-ROM (which included, as I recall, a tour of Gates’s ultra-futuristic home). If Microsoft can “get its mojo back,” the company could truly become a web services provider to rival Google. We’d all benefit from having more choices in search engines, advertising platforms and related tools. And, driving each other to “build a better mousetrap,” the two companies could lead us down the “Road Ahead” from Search 2.0 to Search 3.0 and beyond. So here’s to hoping that Redmond can solve the “Innovator’s Dilemma” with tools like Google’s “20 percent” time that free engineers to innovate!
Jerry Yang’s departure as Yahoo! CEO opens the door to a renewed bid by Microsoft to buy Yahoo!’s search business (or Yahoo! itself). Such a merger could produce a significantly stronger challenger to Google in the search market. With this possibility in mind, the WSJ just ran a fascinating history of the “paid search” 
business—the placement of “contextually targeted” ads next to search engine results based on the search terms that produced those results.
In a nutshell, Microsoft failed to see (back in 1998-2003) the enormous potential of paid search—just as small start-ups (such as Google) were starting to develop the technology and business model that today account for a $12+ billion/year industry, which is
twice the size of the display ad market and which supports a great deal of the online content and services we have all come to take for granted online. Microsoft first put its toe in the water of paid search with a small-scale partnership with Goto.com in 1999-2000. But this partnership failed because of internal resistance from the managers of Microsoft’s display-ad program. In 2000, Google launched Adwords and thus began its transformation from start-up into economic colossus. By 2002, Microsoft realized that it needed to catchup fast, and approached Goto.com (by then renamed Overture) about a takeover. But Microsoft ultimately chose in 2003 not to buy the startup because Bill Gates and Steve Ballmer “balked at Overture’s valuation of $1 billion to $2 billion, arguing that Microsoft could create the same service for less.”
Microsoft, meanwhile, spent the next 18 months deploying hundreds of programmers to build a search engine and a search-ad service, which it code-named Moonshot. The company launched its search engine in late 2004 and its search-ad system in May 2006.
But Microsoft’s ad system came too late:
Advertisers applauded Moonshot for its technical innovation. But Microsoft had trouble coaxing people to migrate to its search engine from Google; advertisers were unwilling to spend large sums on MSN’s search ads. By building a new system instead of buying Overture, Mr. Mehdi says, “we really delayed our time to market.”
What’s most fascinating about the piece is that it seems to suggest that Microsoft missed its opportunities to get into paid search not because it was “dumb,” “uninnovative” or a “bad” company, but for the same sorts of reasons that big, highly successful and even particularly
innovative companies fail. The reasons companies generally succeed in mastering “adaptive” innovation of the technologies behind their established business models are the very reasons why such great companies struggle to encourage or channel the “disruptive” innovation that renders their core technologies and business models obsolete. Continue reading →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.