This Financial Times article describes how users are transforming innovation. Interesting. More alarming is Alec Van Gelder's comment that this will be widely misunderstood:

Unfortunately, I predict policy makers will take out all the good aspects of this - removing subsidies, ceasing to support national champions - and employ all of the bad ones, namely to decrease intellectual property protection. Clearly the authors fail to understand that open source business models are actually a result of a strong intellectual property platform, empowering rights-holders with the ability to determine for themselves how to exploit their property.

There is another aspect of the problem, too. Sometimes, users' interests run contrary to the interests of other groups of users, or of all users' interests in the long run. Suppose a producer figures out how to best provide a service, benefiting all users' by coming up with a mechanism to mostly exclude free riders. A determined group of free riders will supply demand for some third party to intrude upon the beneficial arrangement. Ordinarily, the original producer will respond in kind and restore the economic basis for production. But in some environments, or if the power of the free riders is political, that becomes very hard.

posted by Solveig Singleton @ 11:45 AM | Markets: Business, Investment & Innovation

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