China 'Steals' Intellectual Property That Is Mostly Worthless

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In The Innovators, a mostly excellent book about the history of technological innovation, author Walter Isaacson unearthed a gem of a quote from Howard Aitken, a futurist from the past. Aitken was skeptical about the need for patents given his view that truly great ideas only appear great well after the fact. As Aitken put it about patenting presumed intellectual property, "Don't worry about people stealing an idea. If it's original, you will have to ram it down their throats."

Aitken's wise words have proven true - and without fail - for as long as there's been commerce. The future is quite simply unknown. We needn't fear idea theft simply because what does and doesn't make business sense is rarely apparent at first. Markets exist, and are highly liquid, precisely because one hundred different investors have one hundred different views about what the future will bring. So do consumers. The owners of Amazon Fire cellphones and Microsoft Zune musical devices know this truth intimately.

While a growing number of the world's inhabitants couldn't live or work today without the GPS, it's less well known that the entrepreneur who first divined the GPS's commercial possibilities was turned down by scores of venture capitalists. What's important is that the GPS story is hardly unique.

The Wright brothers were viewed as oddballs for believing that man could fly in machines, but those same brothers dismissed as even sillier the very notion of the constantly breaking-down automobile morphing into a what has become the wildly common car. Financier Junius Spencer Morgan, a fairly keen investor himself, was rather critical of his son's (J.P. Morgan) decision to invest in Thomas Edison and the light bulb.

In sports television, fledgling network ABC was only able to attain the rights to Monday Night Football because NBC and "Tiffany" network CBS rejected the idea of fan interest in watching Sunday's game on Mondays. Miller Brewing Company was able to buy advertising for Monday Night Football telecasts at a relatively low price because market-share leader (by a wide margin) Anheuser-Busch similarly scoffed at the notion of anyone watching.

In their younger days, Bill Gates and the late Steve Jobs famously argued over who allegedly "stole" what technology idea from whom, only for Gates to remind Jobs that both parties (at least in a figurative sense) had previously lifted every idea not nailed down that had been hatched inside Xerox's legendary Parc in Silicon Valley. What's notable about this is that as evidenced by its $10 billion market cap today versus the exponentially greater valuations investors have placed on Microsoft and Apple, Xerox plainly had much less than a clue about the intellectual property within its proverbial walls.

All of this is worth bringing up in consideration of some of the modern American criticism of China. Supposedly the Chinese are "stealing" American "intellectual property," and apparently we Americans must fight back. For Donald Trump partisans on the right who would be aggressively torpedoing Trump's know-nothing protectionism if uttered by Hillary Clinton or Bernie Sanders, China's theft of our intellectual property is the frequent excuse used to justify protectionism that has never worked in all of world history. An economy is a collection of individuals, and as individuals we're always and everywhere advantaged if we can focus on the work we do best while at the same time having the rest of the world's producers competing to serve our needs. So with the good of free trade impossible to seriously refute, Trump's serious backers justify their defense of the indefensible with commentary about how Trump alone will crack down on intellectual property theft from China.

But what's never explained is what property Trump would presume to protect, let alone what U.S. intellectual property Chinese government officials would know to steal. Figure that if either Trump or Chinese officials had a clue about which U.S. businesses were in possession of the valuable technologies of the future, Trump would control many multiples of his claimed $10 billion net worth. And Chinese bureaucrats wouldn't be working in government to begin with. They'd instead be earning billions as investors, and earning those billions while having U.S. companies of all stripes lightly begging them to visit their companies with open access to their secrets a given.

If it's private Chinese businesses stealing American secrets, the same realities apply. Most commercial endeavors either don't pan out or are roundly dismissed ahead of transforming commerce.  Of crucial importance, any commercial advance is as a rule defined by stupendous failure. Goodness, just about every U.S. carmaker from the early 20th century went bankrupt, and just the same, nearly every Silicon Valley technology start-up has gone out of business.

In dynamic economies like ours, good ideas in 2016 will mostly be revealed as bad in 2017. At Amazon, founder Jeff Bezos treasures his company's successful ventures simply because the successes will fund countless experiments that fail. Venture capitalist Peter Thiel freely acknowledges that most of the ideas he backs with venture money die very quickly. So if the Chinese are in fact "stealing" American intellectual property as so many confidently assert, everyone should relax given the historical truth that they're stealing what is mostly worthless.

Further evidence supporting the above claim is the price of U.S. equities. If the Chinese were truly crippling U.S. companies with thievery, this would show up in crashing U.S. share prices alongside the collapse of the biggest export market for Chinese producers. Yet we're seeing neither. As for the supposed theft of intellectual bandwidth behind what is already established in the marketplace, readers need only consider all the former assistants for New England Patriots coach Bill Belichick, along with all the former writers for television hit Seinfeld. Having done this, readers need to check the wins/loss track record of Belichick's past minions as head coaches alongside the hits versus bomb ratio of former Seinfeld writers. Success is hard won, and can rarely be duplicated, or taken.

That's why all this talk of expanding government in order to crack down on China is so mindless. All we'd get is more expensive government in concert with less freedom; none of it making U.S. corporations stronger. We quite simply don't need bigger government vainly trying to protect what it can't possibly know, or understand.


John Tamny is editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading ( He's the author of Who Needs the Fed? (Encounter Books, 2016), along with Popular Economics (Regnery, 2015).  His next book, set for release in May of 2018, is titled The End of Work (Regnery).  It chronicles the exciting explosion of remunerative jobs that don't feel at all like work.  

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