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04.10.2007 (previous | next)
The Private Sector War On Innovators

The Lars Liebeler CNET article cited by Solveig raises interesting issues. The US DOJ and EC suits against Microsoft, as well as antitrust actions with other firms, may have started a disturbing phenomenon: a civil war in the private sector. I’m not talking about commercial competitors trying to beat each other in the market-place; rather, so-called consumer voices that seem to have adopted the DOJ’s and EC's missions, complete with tin-foil hats and all.

I’ll hand it to these self-ordained consumer groups, they are interesting. While claiming to be supporters of free markets, and looking disapprovingly on government interference with the private sector, they would do more harm to creators, consumers and innovation than any government may be capable of.

So, who are they, exactly? I will point to arguments rather than specific groups.

Our dear consumer advocates are romantic. They yearn for absolute free markets, which exist nowhere in the world, and perfect competition, an economic model that has proven itself in almost no industries. And they think that achieving such goals will benefit innovation. At most, the new consumer groups have a niche; as long as there is innovation, they’ll have creators to badger. But be wary of those who derive their usefulness from the productivity of others. They are unable to consider sums, or aggregate effects, they look at minute scenarios that may have no impact on the market, innovation or consumers. They have a low-threshhold for what constitutes harm, so when they want to find evidence of stifled innovation, anything goes.

These self-proclaimed consumer groups proffer policy recommendations with far more damaging potential than those proposed by antitrust regulators. Breaking-up Microsoft years ago would probably not have substantially injured the industry, at least not as much as the long term effects of such a precedence for antitrust regulation. However, the current IP system is far more important than any single company like Microsoft. Thus, its disturbing that our consumer advocates clamor for policy changes like eliminating software patents or repealing the DMCA , which are ill-calculated and would have disastrous consequences for the entire technology industries.

Our new breed of so-called consumer groups should leave innovation to those who innovate, and stop badgering the creators and enterprises that actually bring value to consumers and society. We should be thankful to innovators, not vilify them.

posted by Noel Le @ 6:19 AM | Markets: Business, Investment & Innovation

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hmmm...welll it's rather notable that all 8 of the links in the above post link to...other IPCentral posts. Talk about insularity.

Each post exaggerates, misquotes, or creates a straw horse, and then proceeds to pick apart this hypothetical argument that no one actually would ever make.

Would make much sense to read Col. Boyd on false internal dialogues...

Posted by: enigma_foundry at April 10, 2007 10:58 PM

Mr E, the links above point to other IPcentral posts that comment on external resources or resources authored by others at PFF. This is meant to make it easier for readers to grasp the gist of my points rather than having me write-up an extensive 3 page post.

I would absolutely, positively, loooove to point out those making the anti-corporate and anti-innovation arguments I criticize above. But rather than get personal, it should suffice to outline their argumnets.

Posted by: Noel at April 10, 2007 11:11 PM

I have neither the time nor the inclination to dissassemble all of IPCentral misconceptions about Consumer Advocates. However, just looking at one such link in the above post, and tracking it down until it goes to a non-IPCentral site, I would note the following:

“Our dear consumer advocates are romantic. They yearn for absolute free markets, which exist nowhere in the world, and perfect competition, an economic model that has proven itself in almost no industries. And they think that achieving such goals will benefit innovation.”

Hmm.. Free Markets unproven. Does the PFF suddenly start attacking market forces? Having lived in Poland in 1986, and frequently traveling to Western Europe during that time, I feel I can confidently say that authentic market forces lead to competition, and competition always leads to better products for consumers.

The link "consumer advocates are romantic" takes us to another IPCentral post, which in turn has almost all IP Central links. One link that is not to IP Central, but to the the Electronic Frontier Foundation is found in the following sentences:
“The IP critic perfectionist perspective of innovation has limitations from the outset. It assumes that consumers welfare is deprived when consumers can easily find substitutes of comparable quality.”

However the link “assumes that consumers welfare is deprived when consumers can easily find substitutes of comparable quality.” (probably a typo, and what was meant was: “assumes that consumers welfare is deprived when consumers cannot find substitutes of comparable quantity”) leads to an Electronic Freedom Foundation article about the limitations of the Zune player, and incompatibility between different Microsoft formats, from which no rationale being could derive the summary which IP Central has posted.

Posted by: enigma_foundry at April 11, 2007 9:50 PM

Engima,

In my post, I referred to critics who argue for *absolute* free markets (where there is zero regulation).

The links above that point to PFF links, which point to external resources. Of course, you did not happen to notice the dozen academic articles I reviewed.

I disagreed with EFF's take on Zune because they make it sound like the very existence of Zune harms consumer welfare. If that was the case, nobody would buy it, and if nobody bought Zunes, Microsoft would have to improve it. Evidently, consumers voted against EFF and for Microsoft on this matter.

Posted by: Noel at April 11, 2007 10:17 PM

"Evidently, consumers voted against EFF and for Microsoft on this matter"

So that's why they are buying Zunes, right?


"Zune Sales Lagging Behind iPod, Others
By Ed Oswald, BetaNews
November 28, 2006, 12:44 PM

Sales of the Microsoft Zune appear to be trailing off rather quickly after a fast start, leading some analysts to believe consumer interest is waning.

The player, which stayed in the top 10 in sales in the Amazon.com electronics category for several days following its launch, has now nearly fallen out of the top 100. As of midday Tuesday, only the black player registered, coming in at #96.

Several other manufacturers beat out the Zune: Apple held six of the top 10 spots; SanDisk's Sansa M240 held eighth and 14th spot; Creative's Zen Vision:M also made an appearance in the top 20. Analysts pointed to the player's low rank as an indication that many consumers are passing over the Zune in favor of more established brands."

Posted by: enigma_foundry at April 12, 2007 9:27 PM








 
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