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The Hoverboard’s Patent Problem – Article by Jeffrey A. Tucker

The Hoverboard’s Patent Problem – Article by Jeffrey A. Tucker

The New Renaissance HatJeffrey A. Tucker
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Who has the right to make a “hoverboard”?

Shane Chen of Portland, Oregon, owns the patent to one of the hottest holiday gifts this season. It is a kind of hoverboard, a small item that keeps its user upright using infrared sensors, gyroscopes, and motors. You have probably seen them all over your city. You might even have been approached by a street seller.

The authorized version — licensed by Chen himself — is being made and distributed by Razor USA. Prices started at $1,000 and up, but competition from cheap knockoffs, selling for as low as $200, has brought the price for the authorized version to $600. Still, there are places online where you can get them for $200. If experience in new products in a guide to the future, in a year, they will be available for less than $100.

And truly, these knockoffs are everywhere. Small entrepreneurs are importing them from small manufacturers by the thousands and selling them on the streets. They are making and selling so fast that quality control has been… lax. There are anecdotal reports of explosions and sudden acceleration (parodies on this Saturday night live skit). Amazon has refused to sell many brands.

The patent has proven difficult to enforce. Razor is spending up to $1 million per week to sue unauthorized manufactures. It’s a reminder: it’s never enough just own the government-granted monopoly rights to produce something. It always costs money to enforce it. You have to investigate. You have to litigate. You have to win. And by the time that day comes, you might have lost vast market share.

If the product is popular enough, the task is essentially hopeless. The resources and time expended on patent enforcement might instead of gone to innovation and marketing toward actually making profits. Enforcing a monopoly isn’t necessarily the same as making money. Indeed, it is the opposite.

The Case of Eli Whitney
The hoverboard saga brings to mind the history of one of the 19th-century’s most famous inventions: the cotton gin. The holder of the patent was Eli Whitney. A year after his graduation from Yale, he designed and constructed an improvement in the cotton gin — a technology that had existed since the ancient world. He obtained the patent on a single feature, a brush-like extension that improved the way the seeds were extracted from the cotton.

According to Boldrin and Levine, Eli and his partner Phineas Miller has dreams of getting rich with a monopoly pricing scheme. They would install their machines throughout the South and ask a royalty of two fifths, payable in ginned cotton. This prospect seriously annoyed farmers throughout the region, understandably.

So it became a common practice for farmers to reverse engineer the innovation — not a difficult thing to do. Rather than lease the Whitney machine, they would just make their own. Does this violate anyone’s rights? Of course not. A design of a contraption is made scarce and “owned” only by legislation. To forcibly prevent farmers from making their own machines is actually an invasion of their rights.

Still, with the prospect of riches dancing in his head, Eli and Phineas set out to sue every farmer who reverse engineered their design. “Whitney and Miller spent a lot of time and money trying to enforce their patent on the cotton gin, but with little success,” write Boldrin and Levine. “Between 1794 and 1807 they went around the South bringing to court everyone in sight, yet received little compensation for their strenuous efforts.”

Meanwhile, the gin led to vast increases in productivity. The cotton industry boomed. But the holders of the patent became ever poorer.

Fortunately, the story ends well. Whitney learned that suing people is less profitable than actually marketing products. His next project was to invent a machine that created interchangeable parts for muskets. Having learned his lesson, he did not seek a patent for his innovation. He just got busy right away and began selling. (His main customer, as it turns out, became the US Army.)

He finally did strike it big. As Boldrin and Levine summarize the lesson: “It was not as a monopolist of the cotton gin, but rather as the competitive manufacturer of muskets that Whitney finally became rich.”

Will Shane Chen Learn the Lesson?
The hoverboard, like the cotton gin, is in enormous demand. All the government power is the world will not prevent hundreds of manufacturers from making them, driving the price down and down until everyone can afford one. That one million per week that Razor is spending on trying to stop copycats is probably better spent on marketing and innovation — actually selling stuff rather than trying to prevent others from selling stuff.

Absent the government regulation, how can innovators make money? They have the first-mover advantage. This is what provides a period of high profitability before others get in on the act. This is the competitive market at work, inspiring everyone to serve the customer ever more faithfully through lower prices and better products.

Another factor that gives advantage to the innovators is trust. Even now, you can go to the drug store and see name-brand products living alongside store-branded products. Both make money. Both appeal to certain market segments. One producer’s gain does not necessarily come at the expense of other producers, unless the government intervenes.

It is common wisdom to say that the patent system is broken. But what is broken about it? It’s not that the system is abused. It is that it is used at all. Industrial monopolies achieved through government grants of special privileges create waste — and the ongoing lawsuits concerning the hoverboard are a case in point.

Whether it is ginning cotton or zipping around on city sidewalks, a true innovative society encourages as much production and innovation as possible, in service of the masses who love the newest and coolest thing.

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. 

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

How Waze Makes Roads Safer than the Police – How an App Improved My Driving – Article by Jeffrey A. Tucker

How Waze Makes Roads Safer than the Police – How an App Improved My Driving – Article by Jeffrey A. Tucker

The New Renaissance HatJeffrey A. Tucker
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The app economy has improved our lives in thousands of small ways, with seemingly endless opportunities to download and use gadgets that help us throughout the day, whatever our needs. Most are free or purchasable at a nominal charge.

Forget the ingredients for Shepherd’s Pie? Find it in seconds on the smartphone. Worried about the side effects of a new drug? They are there for you. Not sure about the quality of the restaurant you are about to enter? The crowds are anxious to tell you. Need a burrito for lunch? Uber will bring you one. (You can get a flu shot and a kitty, too.)

The truth is that we live completely different lives than we did ten years ago. We have unprecedented access to all life’s necessities, including medical and nutrition information, mapping information, the weather anywhere, plus hundreds of communication apps that allow text, audio, and video with half the human race, instantly, at no charge.

New Waze of Driving
The app I’m most excited about today is a navigation tool called Waze. It provides mapping, plus delightful instructions on how to get from here to there. But beyond that, it crowdsources information to make the trip more efficient and safer than it otherwise would be. In big cities, Waze will take you through circuitous routes to avoid high traffic areas. It alerts you to accidents, road blocks, and debris on the road.

Impressively, it allows drivers to report where the police are staking out speed traps. It tells you whether the officer in question is visible or hidden. You can also confirm or deny the report.

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Police have objected to this feature of the app. Why? Because it means that drivers are better able to avoid getting ticketed. But think about this: the app actually succeeds in causing people to obey the law better by slowing down and being safer, as a way of avoiding fines.

Why would police object? If the whole point of traffic police is to get people to drive more safely, knowing about police presence achieves that goal.

Of course, we all know the real reason. The goal of the police on roads is not to inspire better driving but rather catch people in acts of lawbreaking so that they can collect revenue that funds their department. In other words, the incentives of the police are exactly the opposite of the promised results. Instead of seeking good driving, they are seeking lawbreaking as a means of achieving a different outcome: maximum revenue collection.

The whole ethos of Waze is different. It helps you become aware of your external surroundings, and conscious that other drivers are in a similar situation as you are, just trying to get to their destinations quickly and safely. We are there are help each other.

The Community Matters
For me this effected a big change in the whole way I drive. There is a tendency from your first years of driving to treat other drivers as obstacles. Your goal is to outsmart others who are crowding the road, moving around them quickly and navigating the roads with a chip on your shoulder. If there are no cops around, you drive as fast as possible.

I never intended to drive this way, but now I know that I have been, since I first received my government permission slip to drive. Once behind the wheel, I tended to think of myself as a lone actor.

Waze has subtly changed my outlook on driving. Other drivers become your benefactors because it is they who are reporting on traffic accidents, cars on the side the road, blocked streets, and the presence of police. They are all doing you favors. If you report, others thank you for doing so. You even see icons of evidence that your friends are driving, too.

Safety is priority one. Waze won’t let you type in a new address while you are driving. You have to stop the car before you can do that.

The app manages to create a sense of community out of drivers on the road, and that changes the way you think when you drive. Now I leave Waze on even when I already know the directions. It’s my connection to the community. I find my whole outlook on driving has changed. For the first time in my life, I can honestly say that I’m a safer and more responsible driver.

So thank you Waze — a product of brilliant entrepreneurship, distributed on private networks, performing a public service.

Compare with the people who are charged with the task of making our roads safe and are paid by our tax dollars to do it. Not only do they fail to accomplish what this one free application has done, they are actively seeking to cripple it.

Baby Steps to a Better World
Maybe this seems like too small a life improvement to justify mentioning? Not so. All great steps toward a better world occur at the margin, bit by bit, through trial and error, one innovation at a time. You look back at the progress of a decade and that’s where the awe comes into play.

It is not through large bills written by legislators and signed by presidents that the world improves. It is through small innovations, inauspicious downloads, incremental improvements in our existing paths that gradually build a better world. Waze is only one of a billion but it points to the right method and approach to an improved life.

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. 

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

Why Open Borders? – Article by Jeffrey A. Tucker

Why Open Borders? – Article by Jeffrey A. Tucker

The New Renaissance HatJeffrey A. Tucker
September 15, 2015
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Two dear friends of mine just experienced incredible struggles with immigration control in the United States, one from Australia and one from Canada. Both are enormously talented, in love with the freedom that America represents to the world — or once did anyway.

One barely got in after months of waiting, even though a willing, begging employer was waiting. The other was deported with a single day’s notice.

Each has been a captive of bureaucrats with awesome power. Their stories are tragic. Natives know nothing about this ghastly system and how it treats human beings. We never experience it.

The labyrinth of bureaucracy is jaw-dropping. The arbitrary power exercised by “our” bureaucrats is frightening. The loss to our nation’s productivity is mindboggling. Hearing these stories, you can’t help but apologize for the way our own government treats people who want to love this country and contribute to its greatness.

And to think that for the first 100 years of this country’s existence we had zero national immigration restrictions. The whole world was invited in — and this invitation led to the most prosperous society the world has ever known. In these times, there were no passports. For the most part, everyone was free to move around the earth — and this was thought to be the very essence of liberty.

Today, we have an effective ban on immigration. You can’t come to the U.S. to live and work legally unless you are family, highly educated, or get in as a refugee. Other than that, the barriers to legal immigration are impossibly high. The wait lines for employment visas are impossibly long, and people from the world’s largest population centers aren’t even eligible.

Meanwhile, the government spends $18 billion on stopping immigration — more than all other federal criminal enforcement agencies combined. This is money spent to stop people from freely exchanging labor for money. That the whole thing is a massive flop is revealed by the 11 million illegal immigrants in this country, and the half million apprehended crossing the border each year — surely only a fraction of those who were not.

But apparently, that’s not enough. Donald Trump is soaring in popularity by calling for mass deportations and building a wall around the country, in effort to double down on a failed government policy. Other candidates are alarmed at his rhetoric, but echo his core claim that there is some kind of crisis going on.

Meanwhile, this is a huge debate among people who otherwise swear fealty to “limited government.” Many people who claim to want freedom seem to have no problem with the implications of a closed-border policy: national IDs, national work permits, non-stop surveillance, harassment of all businesses, a “papers please” culture, mass deportation, tens of billions in waste, bureaucrats wrecking the American dream, broken families, the rights of Americans and foreigners transgressed at every turn.

In this environment of political hysteria, in which the rankest form of racial fear has reared its head, few dare to stand up and call for the only liberty-minded answer: open borders.

Just the phrase causes people to sputter in shock. The objections start flying: wages will fall, welfare will explode, people will vote for the wrong people, there will be cultural confusion, the national language will evaporate, crime will soar — on and on the parade of horribles marches.

The more you look into the research, the more these objections fall away. Immigrants cause less crime than natives. Immigration does not cause unemployment. Immigrants don’t consume more public benefits than natives; in fact, they use fewer. Indeed, they have kept Social Security afloat, even though they will never get a dime from the system. They don’t love liberty less: they poll in as more libertarian. Indeed, every one of these and other claims in Trump’s immigration policy paper are patently wrong.

Apparently, the facts don’t matter. And as for humane values and human rights, forget it. Immigration restriction is a fundamental attack the rights of at least two parties: the person who wants to employ someone currently outside the border and the person who wants to come work. It’s a thuggish interference with an economic exchange, like any other arbitrary restriction on trade.

So often, in many recent discussions I’ve had online, what’s going on here is just a shoot-from-hip bias. It’s exactly the same kind of fears that make people object to getting rid of the minimum wage, cutting taxes, eliminating tariffs, privatizing the TSA, eliminating zoning laws, cutting government spending, legalizing pot, and so on.

It’s freedom itself that people fear.

Once freedom goes away, it is difficult to imagine how things would work if it came back. The notion of freedom then scares people, and it becomes easy to think up a thousand different scenarios in which freedom can’t possibly work. Surely disaster will ensue!

This was a problem during alcohol Prohibition. The system wasn’t working, but the prospect of making its consumption and production legal again elicited a kind of panic. Would our streets be filled with staggering drunks? Would scarce income be squandered on liquor? Would families break apart?

The lack of imagination concerning how freedom can work is the single biggest barrier in the U.S. to ending the war on immigration.

Imagine if the U.S. had massive border controls between states, with checkpoints and passports and drug-sniffing dogs, and if you had to have permission to change from a job in Ohio to a job in Vegas, or if a Virginian could be deported from New Jersey for overstaying, or if you had to wait years to obtain the right documentation to move from one state to another, or if the labor market was so tightly regulated that an employer in another state could only hire you if they could prove they had no other options.

If all that were true, anyone who suggested open borders and a free labor market between states in the U.S. would be considered a dangerous loon.

But here is the clarifying fact: the conditions that allow free migration between states within the U.S. are identical with regard to free migration between the U.S., Mexico, and Canada. The only difference happens to be the government that issues citizenship documents.

I live in Georgia. What if I started a movement to prohibit immigrants from Chicago to Georgia? Why would I suggest such a crazy thing? Because I believe that crime is higher in Chicago, welfare is more widely used, their imported labor would drive down wages, they vote in ways that are regrettable, and people there just don’t get the ways of the American South.

Should we have immigration controls between states? It sounds preposterous (though Trump could probably sell the idea). But the claims that we can’t have free immigration into the U.S. follow the exact same logic.

Every argument for immigration restrictions into the United States as a whole applies with equal validity for immigration controls between states, counties, cities, and even towns. And yet we do not have such controls. Why does it work so well? Because freedom works.

How can we begin to imagine what open borders would be like? We need an experiment in that exact thing. It just so happens that we have just such an experiment. There are 28 countries that have historically been at war for thousands of years. They all have different languages, different religions, and different folkways. At various periods, people from these countries have hated each other to the point of causing genocide.

Then one day, starting with an agreement that began to be implemented twenty years ago (the Schengen Agreement), they opened all the borders. Anyone from these countries can live and work anywhere. They can travel freely, on the same passports. No bureaucracy stops their freedom of movement and their freedom to produce.

The results have been spectacular. It’s the greatest experiment in completely open borders the world has seen in more than a century. It’s called the European Union. And it works. It points toward the ideal: a world in which everyone is free to move about the earth without fear of gun, wall, or barbed wire.

Let’s not fear freedom and free trade (which means, free trade in capital and labor). In the end, Ludwig von Mises was right: “Without the reestablishment of freedom of migration throughout the world, there can be no lasting peace.”

Jeffrey Tucker is Chief Liberty Officer of Liberty.me (http://liberty.me/join), a subscription-based, action-focused social and publishing platform for the liberty-minded. He is also distinguished fellow of the Foundation for Economic Education (http://fee.org), executive editor of Laissez-Faire Books, research fellow of the Acton Institute, founder of the CryptoCurrency Conference, and author of six books. He is available for speaking and interviews via tucker@liberty.me.