Compulsory Licensing of Backroom IT?
overcomingbias.com
overcomingbias.com
The big-rectangle diagram of what I do is fetch data from A, apply B(A), and send the result to Z. This is great when A is a proprietary API delivered over long-poll HTTP, B(A) converts it into a vocabulary common to just our products, and Z is Websockets to a mobile app. When we add a new customer who uses A2 all I do is write B2() and the rest stays the same.
Outside of the company, it's useless. There are thousands of products that do the same thing for different flavours of A, B and C. However, we can get our particular product to our target markets a year earlier than someone starting from scratch.
Compulsorily licensed to a competitor, they'd barely be able to install it because it's not packaged like a product. There's an old database that has evolved over more than a decade that's as crusty as an old fishing boat's keel. If a "good compulsory licensing scheme" would compensate the company for packaging it and writing manuals for it, then it's looking at millions of dollars just in the opportunity costs of taking the lead developers off other projects.
That way it's as boring as possible, which is good for the focus on the real function.
I can't understand this. Google, Amazon, Facebook, Apple, Oracle, Microsoft, countless others, all have their own huge backroom IT software projects.
Which one of them is supposed to have a monopoly on it?
People just seem to throw around 'monopoly' to mean nothing more than 'some large number of companies are able to achieve some things that others aren't'. Some other people just seem to use it for 'company that I think is too successful'.
There's no point in the word any more.
I think part of the problem is people feel free to define the group that can have a monopoly in any way they want. Is the intention here that 'large talented companies' have a monopoly on backroom IT software? If we're going to define groups however we want I can say things like 'people who are good at football have a monopoly on playing football professionally'.
In fairness to Hanson, a natural monopoly is distinct from a “monopoly” in the popular sense. Public utilities are often natural monopolies—for instance, a city might have only one power company because it doesn’t make sense to build the redundant infrastructure for two power companies. Doing so would incur a high, unnecessary fixed cost. [1] I think Hanson’s trying to draw an analogy to such firms, though I find it a bit loose.
There is a point and your confusion is frequent one. Let me clarify.
When a economist like the author uses uses the word 'monopoly', it's shorthand for 'monopoly power'. It's obvious from the context of the discussion what he means. The confusion arises when people know the definition of pure monopoly (single supplier) but don't know what is monopoly power.
Between pure monopoly and perfectly functioning markets there is a large area with varying degrees of monopoly power.
There are different ways to quantify the monopoly power. One is using market power and Lerner index. In perfect markets Lerner index would be zero. In practice it rarely is. https://en.wikipedia.org/wiki/Lerner_index
Internet economy generates large companies with monopoly power trough the network externalities. Dominating companies create barriers to entry for newcomers. If the value comes from being connected to others, the platform that connects gets most of it's value from the number of customers and economies of scale, not from being technically better. (of course, after you have the economies of scale you can hire the best people to keep up).
Classical Natural monopolies like railway systems, telephone and electric networks are often regulated to preserve markets. Platform economies have similar attributes.
Open source software development absolutely has a purpose. Licensing absolutely has a purpose. But generalization is a well-known cost for those in tech, and marketing is a well-known cost at general.
Yes, largely these days process software is the business - it defines the structure, employee roles, how business units interact, how internal accountability works, and so on.
That's why modern startups can contract out in a pure Coase style both employees (Uber etc) and capital assets (AirBnB); only the software is the irreducible core of the business.
Wow. I was totally unaware of this. Short term exclusivity is common but I didn't realise that in the US it was commonly for the duration of the patent!
Similarly they invest heavily in development and IT tooling. It allows them to scale in ways that very few other companies can.
We also see some voluntary licensing of at least software, not seldomly free of charge (and open source). It's probably easier to build something like Facebook today, thanks to frameworks open sourced by Facebook themselves (i.e React). Getting access to hosting at scale is also easier and importantly less capital intensive than before, thanks to the cloud providers, who at least partly, make their internal hosting infra accessible for outsiders.
However, it's not like the big players are open sourcing/selling their most important stuff. AirBnb is not successful thanks to their server side javascript rendering library, but them giving it away is nevertheless helpful for someone trying to disrupt them.
Modern patent practices have diminished the latter part of that tradeoff; many contemporary patents protect only one small part of an invention, or are sufficiently obscure and complex to provide little value to a third party. The rate of technological change has greatly accelerated, which has drastically changed the value of a twenty-year monopoly; many computer-related patents become obsolete long before the patent expires.
I think there is a serious need to review the basic mechanisms of the patent system, because it has gradually transmuted into something fundamentally different. In a great many cases, patents inhibit rather than encourage innovation.
Access to massive data is the real value that these companies have exclusive access to, not IT infrastructure
(I'm not advocating for this, just trying to interpret a practical means for what he's suggesting. This could be a direction for antitrust)
As stated, “backroom IT” sounds like random crap middleware plumbing. But I don’t think that’s what he means to refer to.