1. Presentation to RPI’s MBA-Modernization Program, May 19, 2008 James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut, USA 1

2. The Economist, March 8, 2008: “America's patent system: Methods and madness” 2

3. “Josh Lerner of Harvard Business School found that patents on financial innovations were 27 times more likely than average to result in litigation. …. The most frequent plaintiffs … are patent-holding companies whose only line of business is the litigation of patent suits.” 3

4. The Economist, Sep. 20, 2007: “A Matter of Sovereignty” 4

5. The Economist, “The Next Society,” November 2001 5 Agriculture => Manor, Plantation Feudalism Feudalism Industry => Family Firm, Corporation Capitalism Capitalism Research => Scientific Circles, Universities, Firms New System? New System?

6. 6 “The Nature of the Firm,” Economica, 1937 - Firms exist to minimize “transaction costs” “The Problem of Social Cost,” Journal of Law and Economics, 1960 - Property Rights evolve to allocate property when transaction costs are too high

7. Wikipedia Apache WebServer MIT Open CourseWare Google EBay Apple Firefox Linux EBay Amazon MySQL (Sun) Travelocity 7

8. Ronald Coase, Journal of Law & Economics, “The Problem of Social Cost” (1960) 8 Smoke0.00.51.01.52.02.53.0 Total Value to B0 30 50 60 Marginal Value to B 30 20 10 Total Value to N35 30 20 0 Marginal Value to N 5 10 20

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10. 10 Smoke00.511.522.53 TotalVal-B0 30 50 60 MargVal-B 30 20 10 TotalVal_N80 30 20 0 MargDam-N 50 10 20

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12. The Economist, Sep. 20, 2007: “A Matter of Sovereignty” 12 The Common Law is “an attempt to increase the value of the resource by assigning property rights to those parties … in whose hands the rights are most valuable.” - Richard Posner, The Economic Analysis of the Law, 1972 Without flexible property rights, “the only way we thought we could test out the value of the pollution was by the only liability law we thought we had.” - Guido Calabresi and Douglas Melamed, “Property Rules, Liability Rules, and Inalienability”, Harvard Law Review, 1972

13. http://creativecommons.org/ Copyright Creative Commons Public Domain 13

14. http://en.wikipedia.org/wiki/Copyleft 14

15. Dual Licensing (MySQL) Attribution (96% of licenses) Attribution + No-Derivatives CC 15

16. Wikipedia Apache WebServer MIT Open CourseWare Google EBay Apple Firefox Linux EBay Amazon MySQL (Sun) Travelocity 16

17. 17 Producers’ access to: Timely Review of Contributions Recognition of Peers Potential Customers Users’ access to: Tech-support and Updates Custom Applications User community

18. 18 Private Company gets access to: Development & Testing of New Ideas New “Eyeballs” for Error-Checking Potential Experienced Employees Potential Clients for Customization “Darwinian Flexibility” - Incremental, User-Tested Growth

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20. 20 http://www.worldbank.org/data/databytopic/GDP_PPP.pdf

21. 21 Hernando DeSoto, “The Mystery of Capital,” 2002

22. 22 * Pierre Omidyar * Pierre Omidyar (founder of EBay) $100 Million Tufts Micro Finance Center * Gates, Dell, & Google Foundations - Large Micro Finance initiatives “Millions for Millions”, Connie Bruck, New Yorker, 10/20/06 http://www.newyorker.com/fact/content/articles/061030fa_fact1 * Compartamos (Citigroup $70 Million) - 500,000 Customers

23. 23 Apple vs. Microsoft US vs. Europe Guerillas vs. Traditional Armies theloser the side whose generals wear the prettiest uniforms Military historians have an amusing rule of thumb for determining which army is most likely to win a war, the "Sukhomlinov Effect." Named after General Vladimir Sukhomlinov, the Russian Minister of War at the start of WWI, this rule holds that in any given conflict the loser is most likely to be the side whose generals wear the prettiest uniforms. Sukhomlinov himself was perhaps the most splendidly outfitted general of the war, with gold braid embroidery down to his knees. gold braid embroidery down to his knees. - “Senior”, www.snopes.comwww.snopes.com

24. 24 As the flow of water is determined by the earth changing and adapting to the opponent “As the flow of water is determined by the earth, so the victory of military force is determined by the opponent. Military force has no constant formation, as water has no constant shape. To gain victory by changing and adapting to the opponent is called genius. consummation of forming arrive at formlessness “Therefore the consummation of forming an army is to arrive at formlessness. When you have no form, undercover espionage cannot find out anything, intelligence cannot form a strategy.” - Sun-Tzu, The Art of War, 500 B.C. The Law of Requisite Variety “The Law of Requisite Variety [relates] the number of control states.. to the number … necessary for effective response. This allows us to formalize … the limitations of hierarchical control …, e.g., the military, healthcare, and education systems.” - Yaneer Bar-Yam, www.necsi.org (2004)