Category Archive: Entrepreneurship

  1. No, you can’t multitask. To succeed, you need to focus.

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    If you want a great career in the 21st century, you need to stop trying to multitask and start doing “deep work.”

    That’s one of the big ideas from Georgetown University computer science professor Cal Newport. He urges us to be aware that “there are different types of work and some types have way bigger returns than others.”

    In his book Deep Work: Rules for Focused Success in a Distracted World, Newport explains the difference between deep work and shallow work. You are doing deep work when your professional activities are “performed in a state of distraction-free concentration that push[es] your cognitive capacities to the limit. These efforts create new value, improve your skill, and are hard to replicate.”

    In contrast, “shallow work describes activities that are more logistical in nature, that don’t require intense concentration.” Shallow work efforts, explains Newport, “tend to not create much new value in the world and are easy to replicate.” In other words, they’re the type of work efforts that make it easy for your employer to replace you.

    Deep work, Newport explains, is rare.

    A 2012 McKinsey Global Institute study found that more than a quarter of the average worker’s day is spent answering and reading emails. When you throw in other disruptions such as meetings, checking your phone (the average user spends over 2 hours a day in 76 interactions with their phone), and social media, it is easy to see why deep work is rare.

    Yet, Newport argues, while deep work is becoming increasingly rare, “at exactly the same time it is becoming increasingly valuable in our economy. As a consequence, the few who cultivate this skill, and then make it the core of their working life, will thrive.”

    It takes deep work to master hard things. To thrive in today’s rapidly changing economy requires a commitment to a never-ending process of deep work. Newport offers this example:

    Intelligent machines are complicated and hard to master. To join the group of those who can work well with these machines, therefore, requires that you hone your ability to master hard things. And because these technologies change rapidly, this process of mastering hard things never ends: you must be out to do it quickly, again and again.

    The importance of deep work is echoed by George Mason University economics professor Tyler Cowen in his book Average Is Over. What Cowen calls “quality labor with unique skills” will still remain scarce in this highly competitive global economy. Cowen offers up some questions to help us see if we will remain competitive:

    Are you good at working with intelligent machines or not? Are your skills a complement to the skills of the computer, or is the computer doing better without you? Worst of all, are you competing against the computer? Are computers helping people in China and India compete against you?

    Take a hard look at your work day. Are you honing your ability to do deep work? Your position in the labor force is likely to deteriorate if you are only capable of shallow work.

    If you’re only doing shallow work now, what can you do about it?You can cultivate your ability “to focus without distraction on a cognitively demanding task,” explains Newport. One of his suggestions for engaging in more deep work is: stop trying to multitask.

    Are you multitasking?

    I write “stop trying” because research shows that human beings can’t multitask, they can only switch-task. Each time we switch-task, we lose the possibility of entering into a highly focused state, what psychologist Mihaly Csikszentmihalyi calls “flow.” Switch-tasking is so disruptive that it can reduce our productivity by up to 40%. You are literally working harder to produce less.

    Echoing Csikszentmihalyi, Newport describes how good a state of flow in deep work feels compared to the stress of shallow work:

    We know it’s satisfying to enter a state where you’re giving full, rapt attention to something that you’re good at…. [On the other hand,] someone who’s based mainly in shallow work, neurologically speaking, is going to eventually construct an understanding of their world that is stressful and fractured.

    The late Stanford University communications professor Clifford Nass, along with his colleagues Eyal Ophir and Anthony Wagner, studied multitaskers with the belief that they would uncover cognitive powers of focus that multitaskers had that others didn’t. They couldn’t find such a power.

    Not only do chronic multitaskers lose time switch-tasking, but they also alter their brains in not-so-salutary ways. In an interview, Nass explains, “People who multitask all the time can’t filter out irrelevancy. They can’t manage a working memory. They’re chronically distracted.”

    The multitaskers “actually think they’re more productive,” but they are deluded. Nass explains why: “They initiate much larger parts of their brain that are irrelevant to the task at hand.… They’re even terrible at multitasking. When we ask them to multitask, they’re actually worse at it [than nonmultitaskers]. So they’re pretty much mental wrecks.”

    Multitaskers claim, “When I really have to concentrate, I turn off everything and I am laser-focused.” But according to Nass, the truth is that “they’ve developed habits of mind that make it impossible for them to be laser-focused. They’re suckers for irrelevancy. They just can’t keep on task.”

    In other words, multitaskers have lost the ability to do deep work. The way back to deep work takes time and commitment. As Nass explains, “When we try to revert our brains back, our brains are plastic but they’re not elastic. They don’t just snap back into shape.”

    In a Microsoft study on shrinking attention spans — “the amount of concentrated time on a task without becoming distracted”—Microsoft CEO Satya Nadella observed that an important trait for success was becoming rarer: “The true scarce commodity of the future will be human attention.”

    Stop making excuses.

    Are you blaming your circumstances — for example, a demanding boss — for your choice to not engage in deep work? Are you keeping your eye on a future prize — for example, a promotion or a salary increase — rather than making the day-to-day choice to engage in deep work? Are you reading this article and thinking, “Easy for Newport to say, but he doesn’t know my world?”

    In her book Rapt: Attention and the Focused Life, Winifred Gallagher offers this guidance: “Who you are, what you think, feel, and do, what you love — is the sum of what you focus on.” What are you focused on today? How much of your day is spent on emails, meetings, or social media? How you choose to spend your time today may be crowding out the uninterrupted time necessary for you to do deep work.

    To make deep work the core of your working life, Newport suggests keeping a scoreboard:

    It seems like a simple thing, but without it, it’s so easy to go through a week and just say, “Well, I was busy and I think I did some deep work in there.” Once you start keeping score, you look at it and say, “I did one hour out of a 40-hour week? I’m embarrassed.” A compelling scoreboard drives you to action.

    One caveat: a scoreboard only drives us into action if we stop blaming, take a hard look at the consequences of our choices, and decide there is a better way. If we can honestly say, “My choices have left something to be desired, and now I am ready to make different ones,” then we are at the bus stop for real change.

  2. What Charles Darwin owes Adam Smith

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    The following is a lightly edited, slightly condensed transcript of the talk “Adam Darwin: Emergent Order in Biology and Economics,” presented by Matt Ridley at the Adam Smith Institute in 2012.


    I’ve called my lecture “Adam Darwin” to stress how congruent the philosophies of Adam Smith and Charles Darwin are. The common theme, of course, is emergence — the idea that order and complexity can be bottom-up phenomena; both economies and ecosystems emerge. But my purpose really is to explore not just the history and evolution of this shared idea but its future: to show that in the age of the Internet, Adam-Darwinism is the key to understanding how the world will change.

    The Common Ancestry of Evolution and Economics

    Darwin’s debt to the political economists is considerable. He spent formative years in Edinburgh among the ghosts of Hume, Hutchinson, Ferguson, and Smith. When he was at Cambridge in 1829, he wrote, “My studies consist in Adam Smith and Locke.” At his grandfather Josiah Wedgwood’s house in Staffordshire, Darwin often met the lawyer and laissez-faire politician Sir James Mackintosh, whose daughter married Charles’s brother-in-law (and had an affair with his brother).

    On the Beagle, he read the naturalist Henri Milne-Edwards, who took Adam Smith’s notion of the division of labor and applied it to the organs of the body. After seeing a Brazilian rainforest, Darwin promptly reapplied the same idea to the division of labor among specialized species in an ecosystem: “The advantage of diversification in the inhabitants of the same region is in fact the same as that of the physiological division of labor in the organs of the same individual body — subject so well elucidated by Milne-Edwards.”

    Back in England in the 1830s, through his brother Erasmus, Darwin fell in with the radical feminist and novelist Harriet Martineau, who had shot to fame because of her series of short fictional books called Illustrations of Political Economy. These were intended to educate people in the ideas of Adam Smith, “whose excellence,” she once said, “is marvelous.” I believe it was probably at Martineau’s suggestion that, in October 1838, Darwin came to reread Malthus (a person with whom Martineau was on very close terms) and to have his famous insight that death must be a non-random and therefore selective force.

    Parenthetically, it’s worth recalling the role of anti-slavery in bringing Martineau and Darwin together. Darwin’s grandfather Josiah Wedgwood was one of the leaders and organizers of the anti-slavery movement, a friend of Wilberforce, and the maker of the famous medallion “Am I not a man and a brother?” which was the emblem of the anti-slavery movement. Charles Darwin’s aunt Sara gave more money to the anti-slavery movement than any woman in Britain. Darwin had been horrified by what he called, “The heart-sickening atrocities of slavery in Brazil.” Abolition was almost the family business. Meanwhile, Harriet Martineau had just toured America speaking against slavery and had become so notorious that there were plans to lynch her in South Carolina.

    Today, to a bien pensant intellectual, it might seem surprising to find such a left-wing cause alongside such a right-wing enthusiasm for markets, but it should not be. So long is the shadow cast by the top-down determinism of Karl Marx, with his proposal that the state should be the source of reform and welfare, that it’s often forgotten how radical the economic liberalism of the political economists seemed in the 1830s. In those days, to be suspicious of a strong state was to be left-wing (and, if you’ll forgive the pun, quite right, too).

    Today, generally, Adam Smith is claimed by the right, Darwin by the left. In the American red states, where Smith’s emergent decentralized philosophy is all the rage, Darwin is often reviled for his contradiction of dirigiste creationism. In the average British university by contrast, you will find fervent believers in the emergent decentralized properties of genomes and ecosystems, who nonetheless demand dirigiste policy to bring order to the economy and society. Yet, if the market needs no central planner, why should life need an intelligent designer, or vice versa?

    Ideas evolved by descent and modification just as species do, and the idea of emergence is no exception. Darwin at least partly got the idea from the political economists, who got it from the empirical philosophers. To put it crudely, Locke and Newton begat Hume and Voltaire, who begat Hutchinson and Smith, who begat Malthus and Ricardo, who begat Darwin and Wallace. Darwin’s central proposition was that faithful reproduction, occasional random variation, and selective survival, can be a surprisingly progressive and cumulative force. It can gradually build things of immense complexity. Indeed, it can make something far more complex than a conscious deliberate designer ever could. With apologies to William Paley and Richard Dawkins, it can make a watchmaker.

    Each time a baby is conceived, 20,000 genes turn each other on and off, in a symphony of great precision, building a brain of 10 trillion synapses, each refined and remodeled by early and continuing experience. To posit an immense intelligence capable of comprehending such a scheme, rather than a historical emergent process, is merely to exacerbate the problem — who designed the designer?

    Likewise, as Leonard Reed pointed out, each time that the pencil is purchased, tens of thousands of different people collaborate to supply the wood, the graphite, the knowledge, and the energy, without any one of them knowing how to make a pencil. Says Smith, if you like, “This came about by bottom-up emergence, not top-down dirigism.” In both cases, nobody’s in charge, and crucially, nobody needs to understand what’s being done.

    Why Innovation Happens

    So far, I’m treading a well trodden path in the steps of Herbert Spencer, Frederick Hayek, Karl Popper, and many others who’ve explored the parallels between evolutionary and economic theory. But the story has grown a lot more interesting in the last few years, I think, because of developments in field of cultural and technological evolution. Thanks especially to the work of three anthropologists — Rob Boyd, Pete Richardson, and Joe Henrich — we are beginning now to understand the extraordinary close parallels between how our bodies evolved and how our tools and rules evolve. Innovation is an evolutionary process. That’s not just a metaphor, it’s a precise description. I need you to re-examine a lot of your assumptions about how innovation happens to disenthrall yourself of what you already know.

    First, innovation happens mainly by trial and error. It’s a tinkering process, and it usually starts with technology, not science, by the way, as Terrence Keeley has shown. The trial and error may happen between firms, between designs, between people, but it happens. If you look at the tail planes of early airplanes, there’s a lot of trial and error, there’s a lot of different designs being tried and eventually one is decided.

    Exchange is crucial to innovation, and innovation accelerates in societies that open themselves up to internal and external exchange through trade and communication — Ancient Greece, Song China, Renaissance Italy, 16th century Holland, 19th century Britain — whereas innovation falters in countries that close themselves off from trade — Ming China, Nero’s India, Communist Albania, North Korea.

    More ever, every innovation, as Brian Arthur has argued, is a combination of other innovations. As L.T.C. Rolt, the historian of engineering put it, “The motorcar looks as if it was sired by the bicycle out of the horse carriage.” My favorite example of this phenomenon is the pill camera, which takes a picture of your insides on the way through. It came about after a conversation between a gastroenterologist and a guided missile designer.

    Adam Smith in other words, has the answer to an evolutionary puzzle: what caused the sudden emergence of behaviorally modern human beings in Africa in the past hundred thousand years or so? In that surprisingly anthropological first chapter of The Wealth of Nations, Smith saw so clearly that what was special about human beings was that they exchanged and specialized.

    Neanderthals didn’t do this — they only ever used local materials. In this cave in Georgia, the Neanderthals used local stone for their tools. They never used tools from any distance away, from any Neanderthal sites. But when modern human beings move into this very same area, you find stone from many miles away being used to make the tools, as well as local stone. That means that moderns had access to ideas, as well as materials from far away. Just as sex gives a species access to innovations anywhere in its species, so exchange gives you access to innovation anywhere in your species.

    When did it first happen? When was trade invented? At the moment, the oldest evidence is from about a 120,000 years ago. That’s when obsidian axes in Ethiopia and snail-shell beads in Algeria start traveling long distances. These beads are made from marine shells, but they’re found a hundred miles inland. And we know from modern Aborigines in Australia that long-distance movement of man-made objects happens by trade, not migration. So it’s not that people are walking all the way to the Mediterranean and picking up shells and walking all the way back again; they’re getting them hand-to-hand by trade.

    Now that’s 120,000 years ago — ten times as old as agriculture — but I suspect it goes back further still. There’s a curious flowering of sophisticated tool kits in Africa around a 160,000 years ago, in a seashore dwelling population, as evidenced by excavations at a place called “Pinnacle Point.” It came and went, but careful modeling by some anthropologists at the University College London suggests that this might be a demographic phenomenon: a rich food supply led to a dense population, which led to a rich toolkit. But that’s only going to be true if there is exchange going on, if the ideas are having sex — dense populations of rabbits don’t get better tools. Once exchange and specialization are happening, cultural evolution accelerates if population density rises, and decelerates if it falls.

    We can see this clearly from more recent archeology in a study by Melanie Klien and Rob Boyd. In the Pacific, in pre-Western contact times, the sophistication of fishing tackle depends on the amount of trading contact between islands. Isolated islands, control for island size, will have simpler fishing tackle than well-connected islands. And indeed, if you cut people off from exchange networks, human progress not only stalls, it can go backwards.

    The best example of this is Tasmania, which became an island ten thousand years ago when sea levels rose. Not only did the Tasmanians not get innovations that happened after this time, such as the boomerang, they actually dis-invented many of their existing tools. They gave up making bone tools altogether, for example. As Joe Henrich has argued, the reason for this is that their population was too small to sustain the specialization needed to collaborate in the making of some of these tools. Their collective brain was not big enough — nothing to do with their individual brains, it’s the collective intelligence that counts.

    As a control for this idea, notice that the same thing did not happen in Tierra Del Fuego. The Fuegan Indians continue to progress technologically. The reason for this is that the Magellan Strait is narrower than the Bass Strait, so trade continued and the Feugan Indians had access to a collective brain the size of South America. Whereas, as the Tasmanians had access to a collective brain only the size of Tasmania.

    The Collectivism of Markets

    Now for me one of the most fascinating implications of this understanding of the collective brain is just how touchy-feely liberal it is. I’m constantly being told that to believe in markets is to believe in selfishness and greed. Yet I think the very opposite is true. The more people are immersed in markets, the more they collaborate, the more they share, the more they work for each other. In a fascinating series of experiments, Joe Henrich and his colleagues showed that people who play ultimatum games — a game invented by economists to try and bring out selfishness and cooperation — play them more selfishly in more isolated and self-sufficient hunter-gatherer societies, and less so in more market-integrated societies.

    History shows that market-oriented, bottom-up societies are kinder, gentler, less likely to go to war, more likely to look after their poor, more likely to patronize the arts, and more likely to look after the environment than societies run by the state. Hong Kong versus Mao’s China, 16th century Holland versus Louis the XIV’s France, 20th century America versus Stalin’s Russia, the ancient Greeks versus the ancient Egyptians, the Italian city-states versus the Italian papal-states, South Korea versus North Korea, even today’s American versus today’s France, and so on.

    As Voltaire said, “Go into the London stock exchange and you will see representatives of all nations gathered there for the service of mankind. There the Jew, the Mohammedan, and the Christian deal with each other as if they were of the same religion, and give the name of infidel only to those who go bankrupt.”

    As Deirdre McCloskey reminds us, we must not slip into apologizing for markets, for saying they are necessary despite their cruelties. We should embrace them precisely because they make people less selfish, and they make life more collective, less individualistic. The entire drift of human history has been to make us less self-sufficient and more dependent on others to provide what we consume and to consume what we provide. We’ve moved from consuming only as widely as we produce to being much more specialized as producers and much more diversified as consumers.

    That’s the very source of prosperity and innovation. It’s time to reclaim the word “collectivism” from the statists on the left. The whole point of the market is that it does indeed “collectivize” society, but from the bottom-up, not the top-down. We surely know by now after endless experiments that a powerful state encourages selfishness.

    Let me end with an optimistic note. If I’m right, that exchange is the source of innovation, then I believe that the invention of the Internet, with its capacity to enable ideas to have sex faster and more promiscuously than ever, must be raising the innovation rate. And since innovation creates prosperity by lowering the time it takes to fulfill needs, then the astonishingly rapid lifting of humanity out of poverty that has happened all over the world, particularly in the last 20 years, can surely only accelerate. Indeed, it is accelerating. Much of Africa is now enjoying Asian Tiger-style growth. Child mortality is plummeting at a rate of five percent a year in Africa. In Silicon Valley recently, Vivek Wadhwa showed me a $35 tablet computer that will shortly be selling in India. Think what will be invented when a billion Indians are online.

    In terms of human prosperity, therefore, we ain’t seen nothing yet. And because prosperity is an emergent property, an inevitable side effect of human exchange, we could not stop it even if we wanted to. All we could do is divert it elsewhere on the planet (which is what we in Europe seem intent on doing). “Adam Darwin” did not invent emergence: his was an idea that emerged when it was ripe. And like so many good ideas, it was already being applied long before it was even understood. And so I give you Adam-Darwinism as the key to the future.

  3. Forget about your passion. (Advice for new grads)

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    Popular culture teaches that finding your passion is a major ingredient for career success. When Marsha Sinetar published her 1989 book Do What You Love, The Money Will Follow, she probably had no idea of the millions who’d come to see her book title as solid career advice. What if that advice is wrong?

    It is not hard to find people Psychologist Robert Vallerand conducted a study of Canadian college students with the aim of learning if they were passionate about work or education. His startling findings were that “less than 4 percent of the total identified passions had any relation to work or education, with the remaining 96 percent describing hobby-style interests such as sports and art.”

    Are these passionless individuals just unlucky? Did the passion muse pass them over? Do they need to take more career guidance tests or attend “find your passion” workshops?

    To be sure, “find your passion” workshops have plenty of potential customers. According to a 2016 Conference Board survey, only  about 50% of those employed are satisfied with their jobs. A Gallup survey finds that over 50% of employees are not engaged with their work and an additional 17% are “actively disengaged.”

    From my experience delivering leadership workshops, I know many people are certain their work environment is the source of their dissatisfaction. Many point to obsolete hierarchical management styles as the problem. But what if their own mistaken ideas about success, passion, and job satisfaction are the real problem?

    First, be good at something

    During a 2007 interview with Charlie Rose, comedian Steve Martin was asked to elaborate on career advice he once gave on how to be successful. At the time, Martin stated the obvious: “You have to be undeniably good at something.”

    The obvious answer, Martin reflected, is not what many want to hear. Martin explained, “What they want to hear is, here’s how you get an agent. Here’s how you write a script. Here’s how you do this. But I always say, ‘Be so good they can’t ignore you.’”

    Georgetown University computer science professor Cal Newport used Martin’s advice as the title of his book, So Good They Can’t Ignore You — a book that debunks the passion hypothesis.

    Newport believes that having a craftsman mindset, rather than a passion mindset, is the way to a fulfilling career. Instead of waiting for passion to strike, Newport’s research finds that people get passionate about work as they become good at work. “Passion,” explains Newport, is a “side effect of mastery.”

    Success comes by offering great value

    Newport advises, “If you want a great job, you need something of great value to offer in return.” By itself, your passion is not of great value. Every career path is littered with passionate but unsuccessful people.

    “Whereas the craftsman mindset focuses on what you can offer the world,” writes Newport, “the passion mindset focuses instead on what the world can offer you.” Newport emphasizes the need to offer value to the world.

    For entry-level positions, the passion mindset leads to chronic unhappiness and a feeling that something is missing. Newport explains:

    First, when you focus only on what your work offers you, it makes you hyperaware of what you don’t like about it, leading to chronic unhappiness. This is especially true for entry-level positions, which, by definition, are not going to be filled with challenging projects and autonomy — these come later. When you enter the working world with the passion mindset, the annoying tasks you’re assigned or the frustrations of corporate bureaucracy can become too much to handle.

    Second, and more serious, the deep questions driving the passion mindset — “Who am I?” and “What do I truly love?” — are essentially impossible to confirm. “Is this who I really am?” and “Do I love this?” rarely reduce to clear yes-or-no responses. In other words, the passion mindset is almost guaranteed to keep you perpetually unhappy and confused.

    For those who want to whine about their unfulfilling job or career, it is probably best to avoid Newport’s book. Newport offers tough love. The craftsman mindset “asks you to leave behind self-centered concerns about whether your job is ‘just right,’ and instead put your head down and plug away at getting really damn good.”

    No one owes you a great career

    Newport writes, “No one owes you a great career…you need to earn it — and the process won’t be easy.”

    When individuals examine their careers through a passion mindset, they often make statements that begin with, “If I had the courage, I would quit my job and do…” Newport believes they are missing the point: “Great work doesn’t just require great courage, but also skills of great (and real) value.” In other words, if you leave a job prematurely, before developing your career capital, you will likely fail.

    In an interview, Ira Glass, the famed creator of the longtime radio series This American Life, cautioned, “In the movies there’s this idea that you should just go for your dream. But I don’t believe that. Things happen in stages.”

    Mastery takes hard work and time. Glass didn’t just fall into his great job. He offers this advice: “The key thing is to force yourself through the work, force the skills to come; that’s the hardest phase.”

    Newport believes that the craftsman approach to work leads to the accumulation of “career capital.” You obtain career capital by developing “a collection of hard-won, rare, and valuable skills.” You can then exchange your capital for a “fantastic job.”

    In short, with a craftsman mindset, you can earn a great job. If you are blinded by a passion mindset, you may never begin the journey.

  4. Best Selling Computer Game of All Time Teaches… Economics, Entrepreneurship, and Cooperation?

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    As part of our homeschooling curriculum, our kids spend an enormous amount of time designing complex circuits and structures using a state-of-the-art computer program. They also spend a lot of time communicating with others and finding online resources that can help them when they need to solve a problem.

    Doesn’t that sound better than “our kids play Minecraft a lot?”

    Minecraft is the best-selling computer game of all time, and since its launch way back in May of 2009, it has been fascinating to see how “Minecraft culture” has evolved. It has unleashed a host of YouTube entrepreneurs who review mods and make tutorial videos explaining their creations. Companies make online courses that teach people how to write Minecraft mods using Java. Minecraft is so open and so easy to customize that it isn’t a stretch to say the only limit is the player’s imagination. We’re still working on building out our kids’ channels, Elevator Zombie and Cupcakes and Meat Patties. One of the lessons they’re going to learn, I think, is that this is an open market with no barriers to entry and, therefore, not a market in which they will be able to earn economic profits. But we’ll get to that hard lesson eventually.

    Like all parents we’re working to help our kids navigate the online space and avoid getting too attached to gaming at the expense of other things, but it doesn’t really bother us that much that they play games like Minecraft and Roblox at every opportunity. It has been fun to watch them develop design and problem-solving skills, but—perhaps surprisingly—it has been an excellent opportunity for them to develop their social skills.

    Minecraft servers and Roblox games have different, constantly-evolving norms and a robust marketplace for rules. The kids get to learn how to endure various slights and griefs, to be sure, but they also learn how to cooperate with strangers by playing team games on Minecraft servers or by trying to earn more in-game currency by helping someone harvest wood in Roblox Lumber Tycoon 2.

    They also teach great lessons about entrepreneurship. If you don’t like a game, you can design your own. If you want to cater to a specific community or subgroup, it’s easy. There are, for example, Minecraft servers created specifically for children on the autism spectrum who might want to play the game with others but without running the risk of being raided or killed or otherwise abused.

    I’ve been especially surprised at just how big Minecraft has become online and beyond. One of the best things about Minecraft is that it is practically infinitely customizable, and the internet is filled with mods one can download, install, and enjoy. Once again, norms are evolving to govern the use (and sometimes abuse) of mods and modders, and reputation-based mechanisms help people know which sites they can trust and which sites they can’t when it comes to mod downloads.

    There are people—DanTDM and Stampy Longnose, for example—who make very comfortable livings running YouTube channels consisting almost solely of videos of them playing Minecraft, Roblox, or some other game. They are legitimate celebrities. A year or so ago, a company started making a line of “Tube Heroes” toys based on famous YouTube Minecraft players, and you can see videos of Minecraft and other gaming conventions at which thousands of people are there to see DanTDM play and at which people line up for his autograph. There are also people who earn their living making games and items for Roblox, which has an in-game currency called “Robux” that can be purchased with real dollars and then spent on game passes, special items and upgrades, and so on.

    Games like Minecraft and Roblox give virtually unlimited play to the imagination, and they provide decentralized platforms on which people can build, divide, or conquer—or simply find a community of gamers with similar interests. The internet brings out the worst in us, but games like Minecraft and Roblox show how it can also bring out our best.

    With the Spring semester over and the summer finally upon us, I’ll be looking forward to checking out “Liberty Minecraft,” a new project created and maintained by a Learn Liberty viewer named Nathan, which uses a highly customized Minecraft server that reshapes the game’s interactive multiplayer world into an immersive tool for teaching players about private property and free enterprise.

    Imagine that… playing Minecraft in order to Learn Liberty.


  5. What Charles Koch could teach United Airlines

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    There is no need to repeat the widely known details of Dr. David Dao’s violent removal from a United Airlines flight.

    It is hard to imagine a worse series of decisions made by employees of a major corporation, decisions that may permanently impact the brand image and value of United.

    What was behind the poor decision-making on the part of the crew of United Airlines?

    In his books, Good Profit and The Science of Success Charles Koch explains the use of Market-Based Management (MBM) at Koch Industries, Inc. Market-Based Management, explains Koch, is “a philosophy that enables organizations to succeed long term by applying the principles that allow free societies to prosper.”

    Koch Industries uses, “decision rights to replicate the benefits and responsibilities of property rights in society.” Koch observes that “too many businesses insist that decisions ought to be made by the highest-ranking person in the company hierarchy.”

    The United crew failed to use common sense because, while they had the best knowledge of the situation, they did not have full decision rights. The crew was tasked with getting a few passengers to deplane, but when not enough passengers accepted the compensation offer of $800, the crew stopped asking for volunteers. In his initial public comments on the incident, United CEO, Oscar Munoz, commended the crew “for continuing to go above and beyond to ensure we fly right.” But in later comments Munoz made a big reveal: “We do empower our front-line folks to a degree, but we need to expand that to allow a little more common sense.”

    In other words, if it was going to take, for example, an offer of $1500 to find a passenger willing to deplane, the crew did not have the authority to make that offer. Paradoxically, United’s centralized rules to “fly right” undermined good decision making.

    The union representing United pilots disingenuously blamed the Chicago aviation police for the violence. Yet, the captain of a plane has great power; and the captain stood down as Dr. Dao was dragged bleeding down the center aisle of the plane.

    Empathy and Initiative

    The corporate culture of United Airlines produced employees who seemingly lack empathy for others. Could it be that when people cannot use their “knowledge of the particular circumstances of time and place,” opportunities to be of assistance begin to go unnoticed?

    As in socialist counties, the top-down decision-making hierarchy at United produced passive employees who lacked initiative.

    Under Market-Based Management, Koch writes, “Decision rights are continually earned, not granted or bestowed. Everyone has the authority, and the obligation, to identify and take the initiative to address problems.”

    In his book Wired to Care, business strategist Dev Patnaik looks behind the success of many companies and argues that empathy for customers is a needed ingredient for corporate success. Patnaik writes, “If you want to create products and services that other people care about, you should put aside your problems and start caring about other people’s lives.”

    Clearly, empathy is rewarded in a free market. Firms that encourage widespread empathy discern and respond to consumers’ most pressing needs. In Patnaik’s words, they see “new opportunities faster” and thus strengthen their market position.

    Patnaik’s point is consistent with what we know about entrepreneurial success. In Profit and Loss Ludwig von Mises writes, “Profit and loss are generated by success or failure in adjusting the course of production activities to the most urgent demand of the consumers.”

    In a fast-changing world how can a company create value for others if they don’t care “how other people see the world?” Patnaik explains how when employees have empathy “they make a thousand better decisions every day.”

    United Airlines is a legacy airline. Its corporate culture was shaped in an era when the Civil Aeronautics Board regulated competition by setting interstate routes and fares. Not well known is that the government still protects U.S. domestic flights from competition. A few months ago, I observed,

    United Airlines has a reputation for poor customer service. Given its poor service, why don’t travelers take their business elsewhere? Air travelers have alternatives, don’t they? Yes, but….

    United flies many transcontinental flights between New York and Los Angeles, as well as flights from both coasts to Chicago. U.S. law prohibits competition from foreign airlines on domestic routes. For example, British Airlines flying from London to Los Angeles cannot stop in New York, discharge some passengers, and fill the empty seats with New York passengers bound for LA.

    United faces competition from domestic airlines, but barriers to competition from foreign carriers are giving United an advantage; the market cannot fully discipline United for its poor customer service when travelers have fewer alternatives.

    Competition, not government, is the best regulator. Allow foreign airlines to fly domestic routes and watch service improve and prices fall. Increased competition will create immediate urgency to change the corporate culture of United Airlines. Perhaps Oscar Munoz might pick up the phone and call Charles Koch for advice.

  6. The Long History of Music Piracy

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    When you’re a historian, people expect you to write history. So, twelve years ago, when I told people I was writing a dissertation about music piracy, the typical response was, “But… that’s not history.”

    I couldn’t blame them. The dirt was still fresh on Napster’s grave at the time, and challenges to online services such as Grokster, Limewire, and even YouTube were still wending their way through the courts. The days of using cassettes to make mixtapes or lurching to press the “record” button to capture songs from the radio were not far behind. If anything, a few older folks might have dim memories of shaggy-haired hippies swapping Grateful Dead bootlegs in the 1970s.

    All of this seemed too fresh to be “History” in the way of Adolf Hitler and the Peloponnesian War and the like. But, in fact, piracy has a history as long as sound recording — even as long as written music itself. Jazzheads swapped copies of shellac discs in the 1930s, and shady operators even copied music in the wax cylinder era of the 1910s. Sheet music was bootlegged in the nineteenth century, just as printed materials had been since Gutenberg unleashed the printing press four hundred years earlier.

    Music, though, has proven more vexing to regulate than other copyrighted works. A piece of sheet music is cheaper and easier to photocopy than an entire book. And anyone can play his own version of a song in a way that another writer cannot “play” The Grapes of Wrath. American copyright law did not even cover music until 1831 — originally, only books, maps, and charts were protected.

    As a matter of fact, I discovered that sound recordings were not protected in the United States until 1972. How could this be?

    The Enlightenment Origins of American Copyright

    Part of the reason lay in the United States Constitution itself. Our founding document is a notoriously succinct one, outlining the structure of government and spelling out a handful of basic responsibilities for federal authorities — one of which was copyright. The founders empowered Congress:

    To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

    Children of the Enlightenment, the founders believed that the spread of knowledge contributed to the public good, and government ought to encourage it. (As Thomas Jefferson put it in 1813, “He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”) Thus, government should incentivize “Authors and Inventors” to create — but rights to their works should also be “limited,” so as not to strangle the free exchange of art and ideas.

    And when they said “limited,” they meant it. The first copyright term lasted a measly fourteen years, and Congress only reluctantly added new kinds of works — written music, photography, film — to the scope of copyright over the course of the nineteenth and early twentieth centuries. Seeing copyright as a monopoly, a sort of necessary evil, they were loath to expand its domain unless absolutely necessary.

    The Trouble with Music… and Sound

    John Philip Sousa

    The fate of sound recording shows how true this is. After Thomas Edison worked out the first truly effective method for inscribing and replaying sound waves in 1877, an era of freewheeling piracy ensued. By 1905, Congress was besieged by songwriters, music publishers, and “talking machine” companies with cries for help. Famous composers such as Victor Herbert and John Philip Sousa pled their case, citing the unfairness that a band of rogues profited off their works. (Of course, Sousa also slyly conceded, “I can compose better if I get a thousand dollars than I can for six hundred.”)

    A player piano roll

    But there was a rub. How exactly would copyright reform work? The songwriters were mad because the companies making disks, wax cylinders, and player piano rolls used their music without authorization or compensation; they demanded both. The talking machine companies wanted to record performances of the written music for free. If forced to pay royalties to composers, then they wanted to have a copyright for their own recordings too.

    Congressmen were perplexed. If Sousa owns the copyright for his written composition, then how could the talking machine company own a separate copyright for a recorded performance of it? Isn’t it the same music? What if two different companies recorded two different versions of the same song? Were there copyrights for each recording?

    The debate may seem technical, arcane, even alien to twenty-first century ears, but the politicians contemplated the question long before there were music videos or sampling or remixes. It seems obvious to us today that Frank Sinatra and Sid Vicious’s versions of “My Way” are two distinct works. Obviously, one work — a song — can exist in an almost infinite number of unique permutations.

    Muddling through in the Age of Jazz

    Congress decided to punt on the issue (as it does) — and it turned out to be a good deal for songwriters, record companies, and consumers. With the Copyright Act of 1909, lawmakers set up a system that let songwriters and music publishers earn a royalty when their songs were recorded — but the rate for each “use” (each disk or piano roll manufactured and sold) was a flat one, set by the government. And artists and labels were more or less free to record versions of songs as they pleased.

    What Congress did not decide to do was to provide copyright for sound recordings themselves. It was just too confusing, and in the Progressive Era, anti-monopoly sentiment remained strong in American society. Copyright still looked like too much of a monopoly.

    The curious result was that sound recordings seemed to lack copyright protection — and pirates noticed. For decades, bootleggers operated in the shadows of the US economy, recording live performances of operas, copying out-of-print jazz and blues records for connoisseurs, and sometimes simply making a quick buck. (The Mafia occasionally pirated pop hits, though many bootleggers were just enthusiasts of hard-to-find music.) Throughout, they could point to the law and say they were not violating it — because sound recordings weren’t protected under the Copyright Act.

    The arguments may seem flimsy, but both courts and lawmakers struggled from the 1930s to the 1960s to figure out how to square the circle. Sometimes judges ruled against bootleggers under the doctrine of “unfair competition,” arguing that the pirates freeloaded off the original label’s financial investment in producing and promoting a record. (By making a record or an artist popular, judges reasoned, the label generated “good will” with the public, which the pirate unfairly exploited.)

    The Rise of Stronger, Longer Copyright

    But the problem remained, since Congress was still reluctant to act on copyright reform. It took the outbreak of widespread bootlegging in the rock counterculture of the 1960s to push the issue to the front burner. Armed with cassette tapes, hippie bootleggers copied unreleased Bob Dylan recordings (“the basement tapes”) and captured Jimi Hendrix concerts for an eager youth audience.

    Finally, in 1971, Congress passed a law that provided record labels with protection for their products. And in 1973, the Supreme Court ruled that states could pass their own anti-piracy laws, even though copyright had traditionally been understood as a responsibility of the federal government, and state laws potentially allowed infinite protection for recordings — arguably violating the “limited times” provision of the Constitution.

    In a deindustrializing America of the 1970s, though, the cries of the record industry resonated — as did those of other “information” businesses. Makers of albums and movies and software argued that their firms needed protection more than ever in a post-industrial economy, where information was the currency of the age.

    The old anti-monopoly sentiments of the Progressive Era melted like butter. Beginning in 1976, Congress embarked on a program that lengthened the term of copyright from 56 years to the life of the author plus 50 years; increased penalties for infringement; and expanded the scope of what could be copyrighted and patented (for example, software and genetically modified organisms).  Congress even arbitrarily added 20 years to the length of copyright in 1998 — a law critics dubbed the “Mickey Mouse Protection Act,” since the beloved cartoon character’s copyright was about to lapse at the time.

    The Future of Piracy

    Where does this story leave us today — in a post-Napster world of YouTube, SoundCloud, and BitTorrent? A fan could illegally download Prince’s entire discography within minutes of the artist’s passing in 2016, but he or she could not stream his songs on Spotify because the Purple One had the legal right to keep them off all streaming platforms.

    Prince’s case illustrates the paradox: copyright is stronger and longer than it has ever been before, and yet it is arguably flouted more often than ever too. The US economy still generates a great deal of “information,” but information travels more or less freely. One could argue that the postindustrial economy thrives on the very fact that it is as easy as pressing ctrl-C to copy a word, image, or sound.

    America and the world could do with a bit more of the anti-monopoly spirit of old. I do not need the incentive of a lengthy copyright term to write. (If I live another 50 years, the copyright for this article would not lapse until 2137. Is that really necessary?) And the penalties for copyright infringement do not need to be so punitive that so-called “copyright trolls” can use the law to intimidate a lowly blog out of existence with extortionate demands for using a photo without permission.

    Congress once actually had it right — as hard as those words are to type. Copyright ought to be a pragmatic bargain between artists, business, and consumers that promotes creativity, not a right of vast scope, consequence, and duration that stifles it. Hopefully lawmakers will realize that less state-enforced monopoly power, rather than more, would be good for both the economy of innovation and the public interest as a whole.

     

  7. Quietly creating freedom: Private communities and special economic zones

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    For the last several centuries, nation-states have dominated the political landscape, and set all the rules for everyone inside them.

    But now two kinds of special jurisdictions — private communities and “Special Economic Zones” — are quietly taking over functions and providing options that traditional polities cannot or will not. This gentle revolution has already brought comparative wealth and better living to millions of people — perhaps including you.

    Special Economic Zones

    In a Special Economic Zone (SEZ), a government creates exceptions to its own rules — a select haven from the status quo that prevails elsewhere in the national territory. The goal, says the World Bank, is to create a “business environment that is intended to be more liberal from a policy perspective and more effective from an administrative perspective than that of the national territory.”

    Learn More: New anti-Airbnb law protects hotels from competition (and violates private property and freedom of exchange)

    Modern SEZs come in many types and sizes. One might offer nothing more than duty-free warehousing of goods in transit, while another might provide an alternative governance regime for an entire metropolitan area.

    Though not SEZs in the modern sense, zones governed by special rules have existed almost as long as government itself. These special jurisdictions have coevolved with the nation-state, usually cooperating, but sometimes competing with it. Although they were pushed into decline for centuries, special jurisdictions never died out, and in recent decades they have enjoyed renewed vigor.

    The antecedents of modern SEZs date from 166 BCE, when Roman authorities made the island of Delos a free port, exempting traders from the usual taxes in order to stimulate local commerce. The Hanseatic League, a confederation of trading cities chartered and loosely governed by the Holy Roman Empire, effectively ruled northern Europe from around 1200 to 1600 CE, hunting down pirates and defeating kings in battle. These proto-SEZs, like primitive mammals, had real bite.

    Early types of special economic zones next appeared among many various and far-flung European colonial outposts, formed as quasi-sovereign sub-governments and typically granted unique trading privileges. Examples include Macau (founded in 1557), Hong Kong (1842), and over 80 treaty ports established throughout China from the mid-1800s onward.

    After the Enlightenment-era explosion of these special jurisdictions, the nation-state began its rise. From the Napoleonic Empire, through two world wars, to the collapse of the communist regimes, it ruled the globe.

    Pushed to the margins, SEZs reached their nadir somewhere around 1900, when the world had only about 11 free ports. SEZs seemed headed for extinction.

    Why SEZs Came Back

    What brought SEZs back from the brink? The United States should get some of the credit.

    Its Foreign Trade Zone (FTZ) program, launched in 1934, offered special exemptions from federal excise taxes and duties. This proved convenient for those who, legally speaking, wanted to be within the jurisdiction of the United States while remaining outside its customs territory. The United States boosted SEZs again in 1948, when Operation Bootstrap made Puerto Rico a free trade zone for U.S. companies engaged not just in trade, the traditional focus of FTZs, but also production.

    Despite those precedents, most commentators date the modern SEZ movement from the industrial free zone established in Shannon, Ireland, in 1959. That early example certainly did seem to set off a wave of similar innovations. Since about the mid-1980s, “the number of newly established zones has grown rapidly in almost all regions, with dramatic growth in developing countries.” Today’s most populous nation-state, China, has proved especially prolific, going from 0 special jurisdictions in 1980 to at least 295 today. About 75% of the world’s countries now host SEZs, which number at least 4,000 and perhaps (if you count all the many single-factory zones) nearly 10,000.

    Private Communities

    The sorts of special jurisdictions closest to everyday people — common interest developments — have become increasingly popular both in the United States and worldwide. In the United States, these take the forms of homeowners’ associations, condominium associations, and cooperative residential communities. Residents have flocked to these private “common interest communities” in recent decades.

    The popularity of common interest communities appears not only in the number of people living in them, as graphed above, but also in their growing size and sophistication. Many common interest developments have grown to the size of small cities.

    Their residents entrust these private communities to provide nearly every service otherwise available from a traditional political municipality. The largest cooperative residential corporation in the United States, Bronx’s Co-Op City, houses more than 50,000 shareholder-tenants. Their mutually owned private corporation provides them with utilities, roads, stores, offices, schools, parks, security, and more.

    Highland Ranch, Colorado, evidently the largest homeowner association (HOA) in the United States, boasts of almost 100,000 residents and 31,000 households on 22,000 acres. Highland Ranch also hosts nearly 1,000 businesses, which employ more than 6,800 people; 19 elementary schools, 4 middle schools, 5 high schools, and numerous daycare facilities; several medical facilities; places of worship serving a variety of faiths; and 70 miles of paved and natural trails, 20 parks, two 18-hole golf courses, and an 8,200-acre backcountry wilderness area. In everything but origin and legal status, these resemble conventional mid-sized cities.

    The success of private communities shows the popular support enjoyed by this very local kind of special jurisdiction.

    Pragmatic Advancements

    Further up, so to speak, at the level of SEZs, official support and encouragement become more common. Even when they reach to the highest level of government, though, the roots of special jurisdictions reach back down to the real world.

    Devotion to theory has not characterized the development of special jurisdictions, which governments have instead adopted largely ad hoc. Extemporizing and learning from experience has driven the largest and arguably most successful field test of special jurisdictions: China during the last several decades.

    Learning from the success of the Crown Colony of Hong Kong, itself a historical accident, the Chinese government began in the 1980s to try (or at least allow) a wild profusion of SEZs. Officials did so not pursuant to theory but (silently) in spite of it, and described their policy as “crossing the river by groping for stones.” This intensely pragmatic, theory-free approach seems to have worked in China. Hundreds of millions of people have escaped poverty in Chinese SEZs.

    It also bears noting that, thanks to the spread of privately developed and managed special jurisdictions, SEZs increasingly escape the charge that they can thrive only thanks to top-down subsidies. These days, special jurisdictions happen only if and when private investors fund them. That sort of objective oversight helps to ensure that special jurisdictions, far from floating on clouds of theory, have a solid grounding in the real world.

    The astonishing growth in SEZs qualifies as a revolution of sorts, but not the usual, political kind. Instead of being imposed by domestic or foreign enemies, this revolution has come from within, allowed or even encouraged by existing authorities.

    Instead of descending from the rarified theories of armchair radicals like Karl Marx, it rises from the bottom up, expressed in the everyday choices of everyday people. The same effect appears at smaller scales, in the proprietary communities that increasingly supplant politically-run municipalities. Instead of merely plugging a few new politicians into the same old offices, SEZs, private communities, and other special jurisdictions have the power to quietly and gently transform governments across the globe.

    For more about the revolution quietly transforming governments bottom-up, inside-out, worldwide, look for Professor Bell’s forthcoming book, “Your Next Government? From the Nation State to Stateless Nations” (Cambridge University Press).

  8. Elinor Ostrom, Laurel Thatcher Ulrich, and learning to see the women who have shaped the world

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    “Well-behaved women seldom make history.” Most recognizable from bumper stickers and coffee mugs, the phrase has become a pop feminist favorite.

    CC BY SA 3.0 George Ruban

    You can buy it engraved on 42 different pieces of jewelry on Etsy — possibly even with attribution to the correct author, Laurel Thatcher Ulrich, a professor of history at Harvard University.

    Unfortunately, many adopters of the slogan have deeply misunderstood Ulrich’s original intent. The statement has nothing to do with flame-throwing, or civil disobedience, or even defying convention. Rather, when Ulrich penned the phrase, her point was that the importance of the everyday is too often ignored.1 Well-behaved women seldom make the history books, but they should.

    True, the record of human civilization is filled with those who forged new paths and defied the expectations of their time. These revolutionary figures are important and rightfully remembered.

    However, most people are not Galileo, risking their lives to challenge church and state in their quest for truth. Most people, instead, make their mark by offering contributions on a more modest scale. They produce, innovate, cooperate, and govern within their homes and neighborhoods, and through membership in communities forged both geographically and through shared interests.

    I want to be very clear here that the everyday-ness of most contributions to the world applies equally to men and women. I beg of you, do not read into this argument any implication that women are better suited to contribute in domestic or communal ways.

    However, to the extent the focus of history has been on the grand feats of statesmen and scholars, the historical exclusion of women from formal political and educational systems has diminished the record of their impact on the world. A failure to recognize the importance of social history, including that of enterprise and political organization at the local level, has often gone hand in hand with a failure to recognize women’s contributions.

    Elinor Ostrom

    CC BY SA 3.0 Holger Motzkau

    Elinor Ostrom, like Ulrich, made significant contributions by engaging in scholarship that took seriously the importance of people’s day-to-day actions. Throughout her career, Ostrom studied how it is that people find ways to solve problems within their own communities, even when those problems are considered theoretically insoluble without a great statesman swooping in and forcing people to get along.

    Through archival history, ethnographic fieldwork, and a carefully selected mélange of other statistical and social scientific methods, she studied the role of communities in police services, water conservation, natural resource management, and a variety of other contexts in which individual actors are often considered helpless in the face of how many others could choose to free-ride on their efforts.

    What she found over decades of research was that conventional, non-revolutionary, everyday folks are perfectly capable of coming up with solutions to what other economists and political scientists claimed should have been cripplingly complex social problems. Even classic collective-action problems, like securing mutual commitment to a program of water conservation, are often successfully resolved by voluntary negotiation among individuals. Her book Governing the Commons investigates instances of such local resolution taking place across the world and through history.

    For these contributions, Ostrom was awarded the Nobel Prize in Economics (officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel), in a joint prize with Oliver Williamson in 2009. She remains the only woman to have won the Nobel Prize in Economics.

    The framework that Ostrom used throughout this research emphasized the importance of understanding the rules-in-use in any given social context, as distinct from the rules as formally articulated. It’s the rules that people actually enforce that matter, not what people just say the rules are. What this means is that the formal record is often an unreliable indicator of the actual conditions within which people live, and the constraints that they face when attempting to accomplish their goals. This is why fieldwork has been such an integral component of Ostrom’s research.

    Through this emphasis on fieldwork and rules-in-use, Ostrom’s work — like Ulrich’s — highlights the importance of the everyday, well-behaved approach to making a difference in the world. The everyday is where local norms are created, and where local governance takes place. In part because of Ostrom’s contributions, the significant impact that local practices have on other levels of political and social organization is increasingly being recognized and grappled with by social scientists.

    I would be remiss if I didn’t conclude by noting that, like other women in history, there were several points in Ostrom’s life where her potential was dismissed because of her gender. Her pursuit of a doctoral degree was in defiance of her family’s wishes. The economics department at UCLA refused her graduate admission, and many of the political science faculty were upset when she and three other women were admitted to their doctoral program.2 Her initial appointment at Indiana University-Bloomington might not have gone through had it not been for the fact that she and her husband, esteemed political scientist Vincent Ostrom, came as a package deal.

    Learn More: Jayme Lemke: Feminism is about choice.

    Both Ulrich and Ostrom demonstrate that when we fail to account for women’s contributions — whether or not they are well-behaved — we risk ignoring significant forces determining the shape of the world.


    1Ulrich, Laurel Thatcher. 1976. “Vertuous Women Found: New England Ministerial Literature, 1668-1735.” American Quarterly 28 (1): 20–40. Available at https://dash.harvard.edu/bitstream/handle/1/14123819/Vertuous%20Women%20Found.pdf?sequence=1

    2Herzberg, Roberta, and Barbara Allen. 2012. “Elinor Ostrom (1933–2012).” Public Choice 153 (3–4): 263–68. See also this Big Think Interview: https://www.youtube.com/watch?v=N8CXgBSQhcA.

  9. Fashion design and copyright

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    Should fashion designs be eligible for copyrights? When I listen to people talk about this issue, many of the same interesting arguments come up. These people know about designer knockoffs and feel that something is not quite fair about them. Yet they also view copyists as moving innovation along in the fashion world. Copying releases new fashions from the small circles of their origins to the wider marketplace; it translates designs from abstract experimentation on the catwalk to concrete wearability on the sidewalk. Copying thus plays a vital market role in fashion. And so, in my admittedly small and biased sample, a typical conversation about fashion copyright invariably trends toward a reluctant opposition.

    The issue arises because after a century of relegating fashion designs to the wilderness of intellectual property law, Washington seems poised to begin domesticating the fashion industry. With Sen. Chuck Schumer (D-N.Y.) as lead sponsor, the Innovative Design Protection and Piracy Prevention Act (S.3278) was introduced last August. Design protection bills have been introduced routinely since the 1970s. Yet only in recent years has the cause gained significant legislative momentum. Since 2005 about a dozen precursors to the current bill have been introduced in the House and Senate. A slate of hearings has harvested the views of academics, designers, and celebrity witnesses. The current bill—pruned by numerous drafts and political-legal deals, plus a detailed review by the U.S. Copyright Office—was a honed legislative compromise designed to win majorities in both chambers in a postelection congressional logrolling frenzy.

    If enacted the bill would amend the Copyright Act to provide three years of protection to fashion designs that meet defined standards of originality and novelty. As defined in the bill, a fashion design is the “appearance as a whole of an article of apparel including its ornamentation.” An infringement of a protected design occurs if a copy is found to be “substantially identical in overall appearance” to the protected design, so long as it can be “reasonably inferred [that the copyist] saw or otherwise had knowledge of the protected design.” The bill includes a system of penalties and various provisions to limit collateral consequences like excessive litigation as well as unfair burdens on emerging designers and home sewers. Once the law was in place, fashion would join computer software, vessel hulls, and architectural designs as recent exceptions to the “useful article” rule written into the Copyright Act.

    The U.S. apparel industry has essentially always operated in a “low intellectual property equilibrium” (as law professors Kal Raustiala and Chris Sprigman have aptly surmised in their influential study of fashion copyright). Trademark protects certain features in fashion design like brand names, logos, and unique attributes that consumers use to identify designs with a particular brand. The stitched polo player on Ralph Lauren’s shirts is protected, but the overall design of the shirt is not. The plaid pattern made famous in the linings of Burberry’s top coats is protected; the silhouettes of their topcoats are not. As for patents, the process is too slow and its standards of novelty too strict for fashion.

    Copyright law has traditionally not protected fashion because a garment is considered a “useful article” that combines a utilitarian purpose (covering the body) with the designer’s creative expression. Still, certain articles like a sculpted brooch or an artistic belt buckle are protected if they are considered works of art that are separable, at least conceptually, from the clothing article itself. And while a two-dimensional sketch is generally protected, the physical rendition of the design as an article of clothing is not. “[A] man’s property is limited by the chattels of his invention,” wrote Judge Learned Hand in an important 1929 case involving dress designs, Cheney Bros. v. Doris Silk. “Others,” he concluded, “may imitate these at their pleasure.”

    The case before Judge Hand bore remarkable similarity to the fashion-copying issue before us today. The complainant was a company, Cheney Bros., Inc., whose business model employed constant experiments with dozens of dress patterns simultaneously to discover the designs that would become market trends. Meanwhile the respondent, a company named Doris Silk, would copy the successful dress patterns once they were identified by Cheney’s experiments and then proceed to undercut its prices. Even though Judge Hand’s opinion is full of sympathy with Cheney and he had some degree of impatience with the design copyist, he ultimately could find no refuge for design originators in the law. “To exclude others from the enjoyment of a chattel is one thing; to prevent any imitation of it, to set up a monopoly in the plan of its structure, gives the author a power which the Constitution allows only Congress to create.”

    Having been spurned by the courts, fashion designers did not initially go to Congress for protection. Instead, the industry organized more effectively and took matters into its own hands. The Fashion Originators Guild of America, a cartel among design originators, lasted from 1932 to 1941. Guild members agreed to boycott retailers who dealt with known copyists. The Guild employed clandestine shoppers trained to spot fakes and a tribunal to determine whether designs were copies. Guild members were fined for conducting business with known copyists. While reportedly successful at achieving its ends, the Guild was dismantled in 1941 by the U.S. Supreme Court, which ruled the boycott in violation of the Sherman Antitrust Act. Since then the fashion world has enjoyed almost no intellectual property protection.

    Meanwhile, as one would expect, copying of fashion designs has been rampant and grows faster and more efficient with digital communication and production technologies. Some design copying occurs bilaterally between individual designers. For instance, in 2009 Diane von Furstenberg inadvertently copied protected elements of a men’s jacket designed by two Canadian designers (the dispute was later settled out of court). More commonly, large-scale manufacturers copy the designs of small-scale and artisanal designers, then bring mass quantities of the modified design to market at lower prices. During fashion week or the Oscars, for example, copyists hurriedly beam runway photos to factories around the globe, which translate the images into wearable copies and begin manufacturing tout de suite. Copyists can place finished garments on store racks in a few weeks.

    It is this latter, large-scale form of copying that most disturbs design originators. “When things get copied, it’s like somebody coming into my head and robbing, stealing,” designer Maria Cornejo told NPR’s Kaomi Goetz during New York fashion week last September. This reflects the attitude more broadly of the industry’s upper crust of designers, which sometimes vilifies copyists in support of the pending legislation. In 1996 Narciso Rodriguez designed a wedding gown for his friend Carolyn Bessette for her marriage to John F. Kennedy, Jr. The gown was instantly copied and marketed around the world before Rodriguez could commercialize his own design. Fifteen years later the cleanly elegant design is still popular among brides and easy to find online. Testifying before Congress in 2008 Rodriguez pleaded for protection. “They have stolen my DNA,” he said. “We need your help.”

    As Judge Hand reminds us, copyright is essentially a form of legal monopoly. As with any restriction of competitive market forces, consumers are made to pay higher prices and enjoy less choice than without monopoly. Copyright also restricts the public domain, diminishing the rate of downstream innovation. So the downside to copyright is higher access costs for two groups.

    On the other hand, copyright is intended to encourage creative works since the designers know that their monopoly position will let them capture most of the economic value of their innovation.

    In short, copyright is a social tradeoff: Some access is sacrificed for more innovation. This is a deeply ingrained concept in American society, as Article I Section 8 of the U.S. Constitution empowers Congress “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

    Empirically speaking, the tradeoff bears no relevance to the fashion industry. Rather, fashion is well known as a highly competitive and highly innovative market. Design innovation in fashion is vibrant even though design originators enjoy no copyright and copying is widespread. Each fashion cycle unveils a remarkably creative array of novel designs. Entry by new designers is robust, and bold newcomers often move to the cutting edges of innovation. According to the evidence, the creative forces of design originators respond to something deeper than intellectual property protection, perhaps artistic imperative or the quest for fame. As for revenues, design originators have developed indirect mechanisms to lend their reputational capital to perfumes, cosmetics, and accessories, whose high markups afford handsome licensing fees.

    To be accurate, the supporters of the legislation do not seek to promote innovation but to achieve what they regard as fairness. Steven Kolb, the executive director of the Council of Fashion Designers of America, summed it up in that NPR report: “Designers invest a lot of time, a lot of resources, a lot of energy into creating their collections. It can take them nine months and billions of dollars. So when they present those collections and somebody can just steal them right off the runway, within seconds, and profit from their work, their energy, their intellectual property—it’s not fair.”

    Nonetheless, this competitive and innovative outcome is puzzling because the lack of copyright does not appear to have been significantly costly to the industry. On the contrary, copying helps the fashion industry broaden the scope of its innovations and achieve greater relevance to consumers and society.

    As we scratch the surface of the fashion industry and begin to analyze it more closely, we can see why fashion inverts the expected economics of intellectual property. As consumers of fashion (that is, all of us) we show enormous variety in the way each of us views it. We all place different combinations of value on novelty, exclusivity, style, variety, conformity, comfort, and of course money. Some of us are fashion-conscious. Others have mastered that traveling professor look. Probably most of us take fashion more seriously than we would admit. And we all seem to have strong feelings about how much time and money ought to be spent shopping.

    Copyists enable the industry to meet the range of consumer preferences by segmenting the market into as many different consumer types as possible. By segmenting choices into different styles and price ranges, copyists let consumers easily identify with fashion, become comfortable with a look, experiment and cross over between segments, or pick and choose from multiple segments at once. Go ahead and splurge on the suit, but bargain hunt for the shirt and tie. Segmenting also lets people with low incomes afford to participate in fashion and have access to tasteful, fashionable looks even on a modest budget. Walmart in fact sells its own apparel lines and began showing at New York’s Fashion Week in 2005. Fast fashion has dramatically expanded the options available to low-income households.

    From Catwalk to Sidewalk

    At the high end of design the fashion show lets design originators pursue their innovations. Since originators do not need to uphold wearability or marketability as priorities, they have freedom to experiment with materials, silhouettes, color patterns, hem lines, and so forth. This often results in designs that have high degrees of abstraction. This abstraction in turn gives wide berth to originators in exploring and communicating their ideas—their ideological statements on the current state of fashion, its relation to the world, and the designer’s normative claims on how he or she wishes to change the world. Most people don’t take fashion that seriously (myself not included), and many find it difficult to relate to what comes down the catwalk during fashion week.

    To go from abstract ideas on the catwalk to fashionable clothing on the sidewalk, however, requires an imitative-adaptive process. As with all fields of creative expression, ideas at a high level of abstraction are initially appreciated by niches of elite expertise and taste. Ordinary consumers may not understand everything on the runway but experts can, and these small circles of virtuosity are the only audience that matters when design originators aim to innovate. To then translate the abstract into the economic trend, downstream innovators analyze, imitate, and reformulate the originals, editing the complexity while retaining the aesthetic. This process of adaptation and imitation transports abstract ideas from elite niches to broad appeal, creating clothes that people can relate to and want to wear.

    When design copyists compete to imitate and adapt design originators, they also discover manufacturing and distribution shortcuts that help reduce unit costs. By removing a seam here or there, using less costly fabric, inventing an electronic inventory system, and so forth, fashion copyists reduce their own costs and can offer designs to consumers in even lower-priced market segments. It is only in recent decades that people of even modest purchasing power began to have access to fashionable, tasteful looks. “Queen Elizabeth owned silk stockings,” Joseph Schumpeter famously observed. “The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.” Similarly, Frédéric Bastiat expressed wonder at the market’s ability to feed Paris without a central plan. The same holds for the spontaneous order of the fashion world. Paris gets clothed as well, good sir.

    The public discussion over fashion copyright is well underway. Design originators have a normative head start in that discussion, just as the complaint by Cheney Bros. drew the sympathies of Judge Hand. It is unfortunate that the public discussion treats design copyists as pirates and parasites. We might instead view them as adaptive-imitative entrepreneurs whose innovations serve beneficial economic functions. Copying in fashion is not a mere exercise in copying apparel designs. Copyists translate the abstract into the real, thus moving innovation along in the industry, reducing costs of production, and making fashion relevant to all segments of consumers and society.

    As its proponents will tell you, the proposed legislation is not about spurring innovation. Rather, it is about design originators keeping a bigger share of the economic pie that they help create. In our democratic society, the industry can lawfully attempt to steer the machinery of government in directions that enrich itself. It is up to the rest of us to discuss whether easing the competitive market burdens on design originators is worth the costs to downstream innovators and their consumers.

    This piece was originally published at the Foundation for Economic Education on November 24th, 2010.

  10. A road map for college students interested in a career advancing liberty

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    I have a confession to make: I was one of those annoying overachievers in high school.

    Always on the honor roll. In the Honor Society. President of this and that. Captain of this and that. And, of course, I had a 4.0.

    Why? Hint: it wasn’t because I wanted to spend my Friday nights studying. I did so because that’s what I was told I should do in order to get into a good college. Universities like to see strong grades and test scores, as well as participation in extracurricular activities (sports, clubs, etc.).

    But then I got to college and realized there was no longer a road map for what’s next. Was I still supposed to join a dozen clubs and run for student government? What about the grades? In short: what was I supposed to do in college to make me attractive to employers after graduation?

    The answer to that question depends on what you want to do after college. Future engineers need to do something completely different than those going into a career in the arts and humanities. Aspiring doctors and lawyers need to focus on test scores and GPA while business majors should focus on internships with relevant companies.

    So, what about a road map for a career in the free-market nonprofit sector? I’m glad you asked! As the executive director of Talent Market, a non-profit pro-liberty talent recruiting firm, I have worked with more than 100 free-market nonprofits and have a good sense for what they are looking for when it comes to talent.

    Here are five things to do if you are interested in a career advancing liberty:

    1. Join Like-Minded Student Groups

    Future employers love to see a demonstrated interest in free-market ideas. Whether you join a like-minded organization, get politically involved, or write for the alternative newspaper, you are showing how important advancing liberty is to you.

    2. Participate in Free-Market Seminars, Conferences, and Events

    If you look hard enough, you will find a plethora of liberty-oriented seminars, conferences, and events designed for students like you. Institute for Humane Studies, Foundation for Economic Education, Young Americans for Liberty, Students for Liberty, FIRE, and many other organizations offer opportunities for budding free-marketeers to learn about the ideas of liberty and start developing a like-minded network.

    Click image for more information

    3. Get Internships with Liberty-Oriented Organizations

    Most liberty-oriented nonprofits sponsor an internship of sorts, and that’s a far better way to spend your summer than bussing tables at Applebee’s. Not only will you gain valuable exposure to the inner-workings of a nonprofit, but you’ll also learn more about what types of nonprofit jobs are appealing to you. And, of course, you’ll continue to expand your free-market network.

    Learn More: Learn Liberty Opportunities Hub

    4. Don’t Worry About the 4.0

    It might be important for future docs and legal eagles to maintain a near-perfect GPA, but that’s not necessarily the case for those of us who want to advance liberty. I’ve worked on hundreds of searches for free-market nonprofits, and the only time clients place importance on GPA is for attorney openings, and even then, they are only interested in law school GPA. The opportunity cost of getting a 4.0 in undergrad is high; the extra time you’ll spend in the library is time you won’t be honing your leadership skills as a campus activist or expanding your liberty network at a weekend seminar.

    Now, if you plan to become a professor or lawyer for liberty, grades will matter a lot more. A good undergraduate GPA can have a huge impact on your admission to a good PhD or law program.

    5. Figure Out Where You Belong

    So, you’ve decided you belong in the liberty movement — great! But what exactly are you going do to when you get there? Become a policy analyst? Development officer? Communications specialist? Outreach coordinator? Operations guru? Project manager?

    Internships and networking will go a long way in helping you decide which type of role makes sense, as will perusing job boards and becoming familiar with the opportunities available. And don’t forget to talk to your internship coordinators and get their perspectives on where your strengths lie.

    After you’ve done all of these things, make sure to stop for a moment and congratulate yourself. Why? Because you’ve selected a career path that will bring you a lifetime of fulfillment and make the world a freer place. Well done!

  11. Why classical liberals need a research program

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    In my last post, I discussed several important moral features of classical liberalism; this time, I want to discuss classical liberalism as a research program.

    For thinkers like Ludwig von Mises and Friedrich Hayek, classical liberalism was first and foremost something to be studied and understood. The basic observation guiding their thinking is that the social world is incredibly complex yet also orderly. Furthermore, that order does not appear to be the product of some centralized coordinating authority. “Coordination without command” is the starting point of classical liberalism: how millions of individuals, each in possession of only a fraction of the knowledge necessary to create order in society, and each acting (generally) in the interests of themselves and their loved ones (rather than “society at large”), somehow produce social arrangements that exhibit a high degree of regularity and intelligibility.

    The market is the classic example of such “spontaneous orders.” There are groups that plan within markets: business firms and households. But no organization or group of organizations plans the market itself. Guided by the price system — itself underpinned by crucial institutions that protect private property rights, enforce contracts, and uphold a non-discriminatory rule of law — the groups that act within markets can “react” to each other’s wants and plans just by looking at market prices.

    If the price of oranges goes up, due to an unexpected frost killing off some of the orange crop, some households and firms will forego purchasing oranges and instead seek to fulfill their wants in other ways. The ones who still purchase oranges at the higher prices will be those who value oranges relatively more, such as hotels that can use orange juice as an input into a higher-price good, like mimosas.

    This give-and-take between buyers and sellers is the order of a market economy. Without a centralized commander, the tug-and-pull of freely adjusting market prices helps most everyone get what they want, in a way that minimizes frustrated plans and conflicts.

    To be sure, a positive appreciation for the complexities of markets and their role in human flourishing often yields a normative judgement that markets ought to be left as unimpeded as possible. Mises, famously, held a “rule utilitarian” ethical position: he favored the discovery and implementation of social rules that tended to maximize human well-being. But in order to discover these rules, he had to first “roll up his sleeves” and do the hard work of developing a rich body of social theory that could help him make sense out of the intricacies of the market and other orders, such as legal or constitutional order. Mises first and foremost was a social scientist devoted to understanding the extent to which human beings could live together peacefully, guided by forces other than sovereign fiat.

    Good classical liberals, then, can only responsibly engage the normative realm of classical liberalism if they appreciate how classically liberal institutions actually work — i.e., how real human beings relate to each other in societies not organized along the lines of a prison or army barracks. Even classical liberals who specialize in the normative aspects of the tradition must be familiar with the developments in market theory, legal theory, and constitutional theory as they have unfolded since the late 18th century.

    Classical liberals can and should be ideological. But they ought not be ideologues. For the former, an appreciation of the social world’s complexities and the institutions that govern it occupy center stage. In other words, human freedom is the conclusion written on the final line, not the assumption written on the first line.

  12. How regulations block economic progress

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    [This article is updated from one that originally appeared in the Mercury News.]

    Several years ago I participated in a colloquium whose title was something like “Advancing Technology: Thinking Outside the Box.” The presentations ranged from the ever-more imaginative uses of robots (fascinating!) to irrigating the Sahara Desert for growing crops that by mid-century could sustain the planet’s burgeoning population (unconvincing).

    My lecture was the most mundane: I proposed that better government regulation would act as what people in the military call a “force multiplier” (a tool that increases the effectiveness of your force) for technological advancement. I also argued that at present, excessively burdensome regulation blunts technological innovation.

    Progressive Policy Institute economists Michael Mandel and Diana Carew observed in a 2013 policy memo that “for each new regulation added to the existing pile, there is a greater possibility for … inefficient company resource allocation, and for reduced ability to invest in innovation.”

    The regulatory burden

    The economic burden of America’s accumulating mountain of regulatory requirements is almost unimaginable: According to a study from the Mercatus Center at George Mason University covering the years from 1977 through 2012, regulation’s drag on the US economy has made the economy a whopping $4 trillion smaller than it otherwise would have been.

    One of the reasons for this massive effect is that, as regulations become more and more complex and burdensome, prospective entrepreneurs and managers must expend more resources on issues related to regulation and thus have less available for innovation and corporate growth.

    The Competitive Enterprise Institute’s report Ten Thousand Commandments 2016 examines many of the government’s own cost estimates (which are notoriously low, because bureaucrats tend to lowball the costs and overstate the benefits of their rules). Nevertheless, the study found that federal regulation alone costs consumers and businesses at least $1.9 trillion every year in compliance costs and lost economic productivity — more than 11 percent of current GDP. According to the author, federal regulation is, in effect, “a hidden tax that amounts to nearly $15,000 per U.S. household each year.”

    The “gatekeeper” regulatory agencies, whose affirmative approvals are necessary before new innovations can be commercialized, are the source of much of the massive burden of regulation. The Food and Drug Administration alone regulates products that account for more than a trillion dollars annually — 25 cents of every consumer dollar.

    The average cost to develop and bring a new drug to market is now about $2.6 billion, but many of the largest drug companies spend significantly more than that — for pharmaceutical giant AstraZeneca, the figure is almost $12 billion per drug, and for GlaxoSmithKline, Sanofi, and Roche, it is around $8 billion.

    It might seem counterintuitive that some of the behemoth companies spend the most per approved product; after all, they have the most experience with the processes of clinical testing and negotiating the regulatory maze. The reason is that the biggest companies take the most risks in drug development and, consequently, experience the most failures.

    Too few mistakes

    And that’s not a bad thing; as Phil Knight, the co-founder of Nike, put it, “The trouble in America is not that we are making too many mistakes, but that we are making too few.”

    What he meant is that to discover the Next Big Thing, you need to think outside the box — and inevitably, many of the projects attempted will fail, whether we’re talking about nuclear fusion, new pharmaceuticals, techniques for sequestering CO2, or software to assure the safety of self-driving cars.

    Much existing regulation is superfluous or fails to be cost-effective. In his excellent book Breaking the Vicious Circle, written shortly before he was appointed to the U.S. Supreme Court, Stephen Breyer cited an example of expensive, non-cost-effective regulation by the EPA: a ban on asbestos pipe, shingles, coating, and paper, which the most optimistic estimates suggested would prevent seven or eight premature deaths over 13 years — at a cost of approximately a quarter of a billion dollars.

    Breyer observed that such a vast expenditure on regulating uses of asbestos that confer such tiny risks would cause more deaths than it would prevent from the asbestos exposure, simply by reducing the resources available for other public amenities. Nevertheless, political pressures from environmental activists pushed the EPA into making a decision whose net effect was actually to increase health risks.

    Regulatory excesses make it less likely that in any of the sectors in which American scientists and companies have excelled — nanotechnology, materials science, nuclear power, pharmaceuticals, medical devices, biotech and agriculture, to name just a few — we will discover the Next Big Thing.

    The refinement of regulation to make it more evidence-based and cost-effective isn’t as sexy as growing crops in the Sahara, but it could yield tremendous humanitarian and economic benefits in the near-term and for generations to come.

    Regulators won’t do it without significant prodding, so maybe major health-related philanthropies like the Howard Hughes Medical Institute, Gates Foundation, and Chan-Zuckerberg Initiative should make it part of their agenda. As wealthy as they are, they and their grantees would benefit from the “force multiplier” effect of smarter, more streamlined, more efficient regulation.