There is a significant class of innovations that would create drastically less value for the world if their value had been captured by their creators

Even if Creations whose impact depends on being public generate uncertain value through not-particularly modular combination with many other things and have a large combinatorial surface area we are still left wondering “how common are these creations, actually?” People trying to capture the value from their creations have generated massive value in the world, so maybe anything else is a corner case.

This argument is focused on work that you could conceivably privatize and use to drive a for-profit organization. There is also a whole separate class of work whose value is just hard to capture. It is hard to capture value from research.

Empirical Approach

Note: There are two glaring problems with the empirical approach. First, we cannot go through every technology so there will be inevitable cherry-picking. Second, Counterfactuals are hard. There is no way to ‘prove’ that a technology would have had more or less impact if it were public or private. With these problems in mind, the empirical approach is probably most useful to try to disprove the assertion that there is a non-trivial set of heuretics whose impact depends on being public. If the disproof feels weak, that is perhaps the best empirical evidence for the claim.

One of the strongest pieces of evidence that private innovations alone can carry the torch of progress forward is the innovation ecosystem of the late 19th and early 20th century. It was an age of massive technological change (Vulcanized rubber! Automobiles! Airplanes! Electricity! Telephones!) - almost all created by private for-profit companies.

Arguably, many of these innovations only hit the mainstream when the component technologies became public knowledge. There was an explosion of car patents in the 1880’s and 1890’s and an explosion of car production in the 1900’s and 1910’s, roughly tracking a patent’s 20 year lifespan. Of course, this could be completely correlational and the time gap between invention and diffusion is just how much time was needed for learning-by-doing to happen. Anecdotally, it’s telling that safety glass was patented in 1905 and became standard equipment in 1926.

None of these technologies were complex enough that you couldn’t basically figure out how it works by taking it apart nor did they require up-front capital costs inaccessible to individuals without institutional backing. That means that almost by default the technologies became public knowledge as soon as it was sold. The sufficiently low cost and complexity combined with the cost of acquiring and enforcing patents in multiple countries at once meant that while private, for-profit organizations were creating the technology, it was virtually impossible for a single organization to blunt its impact across the whole world.

Each of the ‘charismatic’ technologies we think about from the late 20th century were “final goods” with relatively small functional surface area. Additionally, these technologies could become good enough to have some market with relatively low-complexity component parts that could be created in-house. In situations where those component parts were artificially private thanks to patents (like the Wright brothers’ patent on coupled wing-warping/rudder control for airplanes) the invention’s impact was (arguably) heavily suppressed until it was made public. Arguably patents held back the airplane industry.

The upshot is that almost no Industrial Age technologies meet the criteria that we would predict should lead to being hamstrung by being private. Strictly enforced patents on the technologies that approach the criteria (like airplane control) did hamstring impact in the US where the patent was in effect.

So which technologies would meet our criteria and were they public or private? The age of chemical engineering, especially process innovations, that began in the early 20th century seems like good hunting ground. Chemicals and the scalable processes to make them are rarely a final product and can be tuned for many different purposes.

The Haber—Bosch Process is one of the most charismatic chemical processes. It also turns out to have been made public through a non-exclusive license at gunpoint. From Enriching the Earth:
The first transfer of the Haber–Bosch process abroad was a result of the Versailles Treaty, which the defeated Germany had to sign in 1919. By its terms, BASF was obliged to license construction of an ammonia plant with an annual capacity of 100,000 t in France.

It would be an entire (worthy!) research project to discern the licensing practices around other chemical processes. However, skimming through the history of the heavy hitters, there seem to be repeated references to multiple companies bringing them to market. ( How We Misread the History of 20th-Century Science and Technology.) Additionally, a significant chunk of the work still ended up in academic papers instead of patents, whether it was being done in universities or industrial labs. (See The decline of science in corporate R&D) The number of corporate-lab published papers suggests that at least more of the steps leading up to an innovation were public than today.

Another piece of anecdotal evidence is that before The relationship of government, academia, and technology fundamentally changed in 1980 with the Bayh-Dole act, it was hard to have exclusive license rights on federally funded research. The default flipped after 1980 to a default state where research institutions by default had exclusive rights to the output of federally funded research.

The computer age is littered with confirmational anecdotes. Alan Kay argues that the technologies created in Xerox PARC have created trillions of dollars in value. Imagine a world where Xerox sued the living daylights out of any product that used a mouse or a GUI. I suspect the mouse and GUI would have created much less value in that world.

Counterfactually, what would have happened if AT&T were not required to license for free all of the non-telephone patents at Bell Labs? Two plausible scenarios could have happened: Either AT&T would have had a monopoly on the semiconductor market or William Shockley would have had an exclusive license to the technology. In the former situation, it’s likely that semiconductors would have been treated the same way as most technologies tangential to a core line of business historically have been: marginalized and deprived of the chance to live up to its promise. An eternally expensive piece of military equipment. Considering the latter scenario, consider that Shockley was a notoriously terrible manager and Shockley Semiconductor went out of business in 1968. The traitorous eight would never have left, so Shockley Semiconductor might have persisted, but would the innovations that came out of Fairchild have happened? Would Hoerni’s Planar Process have been created and adopted in either situation? Poor management is great at killing weird paradigm-shifting ideas.

How much value has Linux created? If Linus Torvald were trying to capture the value it created, how would Linux have been anything other than a shitty version of windows?

Conclusion

Many ideas have massive impact because people can copy them without paying their creator. Any mechanism for capturing value has more or less built-in friction. This friction can limit the diffusion of innovations.

The strong argument in favor of trying to capture value is that value capture is what incentivizes and funds innovations in the first place. Value capture is not a binary “either you capture all of the value or none of it” but a question of how much of it you capture and how you capture it. Arguably Google (and many other companies) have created much more value than they have captured and may have created less value if its creators hadn’t tried to capture that value. tensions. However, these companies generally are not making their money off of innovations with large surface area that generate uncertain a priori value through not-particularly modular mechanisms. ^1Creations whose impact depends on being public generate uncertain value through not-particularly modular combination with many other things and have a large combinatorial surface area].

Current value capture mechanisms are crude - patents are legal monopolies and create limits by definition. Better value capture mechanisms could create a world where any innovation could create as much value as possible and its creators could be rewarded.

I don’t disagree that we need better value capture mechanisms, and perhaps its a failure of imagination but I don’t know how you can’t have value capture without introducing some friction into the system in order to track contributions and forcibly extract money from people who are keeping more than fair share (the equivalent of suing someone who isn’t paying the licensing fees on a patent.)

Given these considerations and the fact that this class of innovations seems to become more prevalent as the complexity of technology and its dependence on research pipelines increases, it seems clear that there is an unfortunate tradeoff between impact/value created for the world and value capture at the technological frontier.

Big List O’ Case Studies

Public things where the counterfactual is probably less impact

  • The semiconductor
  • ARPA net
  • GUI
  • GPS

Private things where the counterfactual is probably more impact

  • CRISPR
  • SABER engine
  • APM
  • GPT3

Public things where the counterfactual is probably more impact

  • Rockets (?)
  • OpenBCI

Private things where the counterfactual is probably less impact

  • Li-Ion batteries
  • Google Algorithm
  • Xerox copier

Related

^1: Ironically, Google may be an outlier here because of billions of eyeballs + ads.

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