WATER MARGIN, KNOWN IN CHINESE as Shuihu Zhuan, is a fourteenth-century novel that depicts the life of Song Jiang, an outlaw who helps the poor by stealing from the rich. It is a story that many have likened to that of Robin Hood and his merry men. And now, it seems, this narrative has found fresh application in the copycat culture of Chinese innovation.
Throughout China, entrepreneurs are “robbing the rich” of intellectual property through a process known as shanzhai. The term refers to pirated or imitation brands and goods. But the concept encompasses more than knockoff products. It is also about adapting products to consumer tastes. While some argue that shanzhai is outright theft, others point to its ingenuity in not only imitating existing products but also enhancing and adapting technologies for local markets and lower-income consumers.
Many innovators in China and India argue that appropriating the intellectual property of larger, predominantly Western companies is an ethical duty, particularly when these companies fail to price their products affordably. Shanzhai is a modern-day solution for a historical Robin Hood dilemma: In the face of tyrannical rule, rob the rich to supply the poor.
This appropriation is acute across fast-moving consumer good technologies. The best-documented instances of shanzhai are in the telecom industry, where shanzhai innovators sell mobile phones for as little as a fifth of the price of name brands. Beyond mobile, the “shanzhai sector” is expanding into more sophisticated product lines. Shanzhai electric cars are being built and sold for as little as two to three thousand dollars in Shandong Province. By contrast, new electric cars such as the Nissan Leaf, Chevy Volt, and Toyota Prius cost upward of twenty thousand. Many shanzhai innovators cater to China’s mass market better than foreign multinationals, given the domestic advantage of knowing the customer base and its price points.
Consider BYD, a local business that started out by producing and selling knockoff Toyota cars at half the price. Founded in 1995 with family money and beginning with only twenty employees (it now has more than ten thousand), BYD has moved beyond its shanzhai roots to become one of China’s most successful legitimate automobile manufacturers. In 2013, BYD became the tenth largest automobile brand, selling more than half a million passenger cars in China.1 Its owner, Wang Chuanfu, is now among the world’s five hundred richest people, according to Forbes.
Within the Misfit Economy, the copying strategies employed by shanzhai innovation are smart and lucrative. Copying provides a running start for small local businesses and start-ups because they are able to leverage a market that has already been established and proved by the original product. This creates a quick, reliable revenue stream. In other instances, such as BYD, shanzhai serves as a temporary strategy, providing a means of catching up with incumbent companies and transferring manufacturing skills. After gaining traction, companies may then choose to distance themselves from their shanzhai roots, as they mature and seek to protect their newly built market share.
Ultimately, this Robin Hood approach to IP is nothing new. The United States went through its own shanzhai period during its industrial development, when it ripped off patents from Europe. In the late eighteenth and early nineteenth centuries, the mechanical designs of cotton mills and spinning machines were taken from England and smuggled into the United States by skilled machinists.2 As Doron S. Ben-Atar writes in Trade Secrets, “Lax enforcement of the intellectual property laws was the primary engine of the American economic miracle.”
Ultimately, shanzhai is not about creating unique new products. It’s about mashing up different elements that are in the formal marketplace completely separate. For example, you and I can buy either an iPhone or an Android, or you can buy either a MacBook or a Windows-run PC. End of story. Shanzhai innovators look to what isn’t on the menu: a smartphone that looks like an iPhone but runs on Android, or a laptop that looks like a Mac but runs Windows.
In the 1800s, the eccentric English writer Charles Caleb Colton said, “Imitation is the sincerest form of flattery.” Flattering it may be, but copying is often the source of great anguish and aggravation for the party who has been imitated. Both culturally and legally (through the application of intellectual property law), there is a widely held view that ideas and creative output are proprietary. When this principle is breached through an act of copying, the person or group whose work has been misappropriated often feels that individuality, originality, and self-expression have been unfairly infringed upon and exploited.
Certainly, copying is not a new phenomenon. When Charles Dickens arrived in Boston in 1842, he was upset to find bookstores selling unauthorized copies of his work. Mark Twain filed a civil suit in Canada when he learned that cheap unauthorized editions of his books were being published and sold.
The market for counterfeit goods was once rampant within the food sector. As the Boston Globe reported:
A committee of would-be reformers who met in Boston in 1859 launched one of the first studies of American food purity, and their findings make for less-than-appetizing reading: candy was found to contain arsenic and dyed with copper chloride; conniving brewers mixed extracts of “nux vomica,” a tree that yields strychnine, to simulate the bitter taste of hops. Pickles contained copper sulphate, and custard powders yielded traces of lead. Sugar was blended with plaster of Paris, as was flour. Milk had been watered down, then bulked up with chalk and sheep’s brains. Hundred-pound bags of coffee labeled “Fine Old Java” turned out to consist of three-fifths dried peas, one-fifth chicory, and only one-fifth coffee.3
Today counterfeit products are growing seven times faster than legal goods; they make up about 10 percent of the world’s trade. According to the International Anti-Counterfeiting Coalition, the international trade in pirated and fake goods amounts to $600 billion, comprising as much as 7 percent of global trade.4
In China, the home of shanzhai, pirating extends to retail stores, designs for buildings, even entire cities. In 2011 Chinese authorities in Kunming, southwest China, discovered twenty-two fake Apple stores. The employees donned the now-famous blue T-shirt and white lanyard; some perhaps believed they were working for Apple.5 An office and retail complex in Beijing designed by the London architect Zaha Hadid was replicated in Chongqing, a major city in central China. In the Chinese province of Guangdong, you can find an exact replica of Hallstatt, a centuries-old Austrian village.6
Across every major city, there are blankets and tables of counterfeit goods lining the sidewalks: “designer” wallets and purses, watches, DVDs, and more. Nowhere is this phenomenon more evident than at the Chungking Mansions in Hong Kong, a mecca for copycat pirates. Described as “a ghetto at the center of the world” by anthropologist Gordon Matthews, Chungking Mansions is seventeen stories of gray- and black-market goods. Hawkers greet you at the door: “Louis Vuitton. Handbag, handbag.” “Copy, copy, good price.”
You can spend a day or stay the night in the hostels that line the upper floors of the building. Wandering around the mall-like interior during the day, you can purchase a masala curry from an Indian cook, share an elevator ride with a prostitute from Kenya, swap stories with a Nigerian pastor, and buy a knockoff phone from an Iranian electronics dealer.
Strolling amid the buyers and sellers are private investigators, often hired by multinational companies such as Microsoft and Pfizer to police the markets for copycat goods. Their job is to “bring to justice” the criminals responsible for selling counterfeit goods. However, the task of slowing down the shanzhai trade is seemingly impossible, given that the scale of counterfeiting in China has been enabled by lax government regulators who ignore many of the copycat markets. In Chungking Mansions, the building has security guards and an extensive CCTV surveillance system, but walking the premises, we were offered Class A drugs, fake DVDs, and imitation smartphones. The copycat trade here does not seem to be impeded by regulatory forces.
THE WORLD OF COPYCAT INNOVATION is not limited to the types of counterfeit consumer goods sold in Chungking Mansions. Since the Internet revolution, with information so readily accessible, products, services, even whole businesses can be cloned and copied with ease.
The Berlin-based company Wimdu, for example, is an exact replica of the successful platform Airbnb, a peer-to-peer rental market that provides an alternative to hotels. Wimdu was built by reverse-engineering Airbnb’s functions and borrowing from the site’s look and feel. Illustrating the power of iteration over pure invention, Wimdu created in a matter of months what it had taken Airbnb four years to develop. By June 2011, the company had raised over $90 million.7
Wimdu was started by three now-infamous German brothers—Oliver, Marc, and Alexander Samwer—who have a history of reverse-engineering U.S.-based innovations and selling them back to the originator for a hefty price. They have built companies that have been sold to eBay and Groupon and have invested in German versions of U.S. innovations such as YouTube, Twitter, and Facebook.
In a rare media appearance in Wired, Oliver Samwer explained the brothers’ perspective: “We are builders of companies, we are not innovators. . . . Someone else is the architect and we are the builders.”8
Are there benefits to being a builder versus an innovator? What are they? In his book Copycats, Oded Shenkar argues why strategic imitators (or, as he calls them, “immovators”) should be studied: “Imitators are less likely to become complacent, a significant problem for innovators and pioneers who are taken with their success to the point of underestimating the dangers lurking in the rearview mirror.” Imitators, on the other hand, who “come from behind, tend to be paranoid about others following in their footsteps and are better prepared to repel the attack.” Pioneers are often stuck in one way of doing things—the way they invented—while imitators are often more aware of transformational changes in the market precisely because they imitated.
As Wired’s Matt Cowan reported, in 1998 Marc Samwer had an instinct that eBay would thrive in the German market, as the country still suffered from old regulatory retail laws that prevented discounts (a vestige of its reunification in 1990, after the Berlin Wall crumbled). His brothers agreed. The Samwers told Wired that they contacted eBay via email numerous times, recommending that the company replicate the platform in Germany (and hire the Samwers to do so). Claiming that eBay failed to respond, the brothers started their own German-language auction site, Alando, which was then purchased by eBay for 38 million euros (over $50 million) only a hundred days after its debut. Had the Samwers not copied, eBay might have remained complacent, not realizing its potential within the German market.
Southwest Airlines, the low-cost U.S. giant, took one model (flying) and removed all the frills that most people didn’t value, to offer a casual and inexpensive flying experience. EasyJet and Ryanair (both European) then replicated Southwest’s idea, combining the fundamental model of low-cost flying with their own nuances. Ryanair went for the low-cost extreme, at one point proposing to charge for using the toilet, and offering “standing seats.”9
As Shenkar writes in his book, Visa, MasterCard, and American Express copied Diners Club (the original credit card company), and the Japanese auto giant Toyota copied German engineering.
It is claimed by many that these copycats are immorally stealing the ideas of others, endangering our economy and jobs and even, in the case of some copycat products—such as counterfeit pharmaceuticals—risking lives. But is there anything that we can learn from them?
While we certainly do not advocate or condone the theft of intellectual property, we do believe that copying in the Misfit Economy can be beneficial and can play a role in helping to foster innovation.
Creativity in some industries thrives on copying, as Kal Raustiala and Christopher Sprigman found in their book, The Knockoff Economy. For example, the fashion industry remains innovative due to copying. Textile giants such as H&M, Forever 21, and online shopping platform ASOS flourish by imitating designs originated by more expensive brands.
Defenders of copycats claim that such imitators are natural competitors and are good for the economy. They help to break up monopolies and ensure innovation. Others argue that copying is a force for good in the world, bringing about incremental improvements and allowing products and functions to evolve. Intellectual property pirates, copycats, and those engaging in “collaborative innovation” can accelerate the diffusion of innovation and enable human progress. Henry Ford’s assembly line, the personal computer, the Gutenberg press, the Internet: None of these innovations was a solitary in-a-vacuum, something-from-nothing, lightning-in-a-bottle creation. Innovating within the Misfit Economy often means building upon what has already been built, improving upon what exists already. All of these inventions were cumulative, collective; all happened step by step, idea upon idea, over time.
Many of us cleave to our own ideas. But part of learning to innovate is recognizing that other people sometimes have better ideas, and that what we think are “our” thoughts are not our ideas at all but ours to witness.
How often have you had what you were certain was an original thought or concept only to discover that others had it, too, either prior or simultaneously? The discovery of the double-helix structure of DNA is one example—James Watson and Francis Crick are known to have been working on the problem at the University of Cambridge while Rosalind Franklin and Maurice Wilkins at the University of London did the same.10
The theory of evolution, while largely accredited to Charles Darwin, was independently conceived by British biologist Alfred Russel Wallace. Wallace sent Darwin a letter outlining his theories of evolution. Darwin was shocked to find that Wallace’s theories were almost identical to his own, which at the time were unpublished. The two went on to coauthor On the Tendency of Species to Form Varieties, and on the Perpetuation of Varieties and Species by Natural Means of Selection, the first publication about natural selection, in 1858. But it wasn’t until Darwin published On the Origins of Species a year later that the public interest was really captured. On the Origins of Species was a compilation of research Darwin did nearly twenty years earlier, and the first printing of twenty-five hundred copies was already oversubscribed at the book’s launch.
John Lienhard, author of The Engines of Our Ingenuity and retired professor of mechanical engineering and history at the University of Houston, describes this phenomenon best:
Last year, two different men said to me, “I invented the heat pipe.” Neither had ever heard of the other’s work. And each really did invent the heat pipe. One described it in rudimentary form as early as 1937. The other created the modern form in 1962. Neither has profited from his invention. Each planted the seed. Each added to the collective unconscious of the technical community.11
This scenario invokes the notion of a collective unconscious or simultaneous invention. If an idea is “in the air” and capable of being thought of by many, can it be owned by anyone?
The term “collective invention” was popularized by economic historian Robert C. Allen in writing about one of the most mainstream, formal-market industries: steel. With steam engine technology, there were a plethora of firms eager to exchange information, practices, techniques, and designs, to the extent that no single inventor was responsible for major innovations in the steel sector. As Allen states with reference to the blast furnace industry in England:
If one examines a sector like the blast furnace industry and determines the inventions whose diffusion were important for the growth in efficiency, it proves impossible to attribute their discovery to any single inventor. Certainly, no one received a patent for many of these advances. Thus, the increase in furnace height and blast temperature that were so important for productivity growth in England’s Cleveland district evolved through the actions of many individuals over a twenty-year period.12
Historically, the open sharing of information was made necessary by high up-front investment costs associated with R&D, which couldn’t be shouldered by an individual firm. As a result, R&D was not perceived as a competitive driver—it was a pre-competitive function, with many firms pooling resources. R&D was a misnomer altogether, for many firms didn’t allocate resources to research and development (itself) but, rather, generated R&D or, more aptly, “technical material and knowhow” as a by-product of normal investment. This information was then shared across firms to accelerate overall productivity.
While it seems contrary to share intellectual property, in the case of the steel industry, Allen writes, “collective invention spread costs among the firms in the industry.”13 Given the economic constraints of many small businesses in today’s economy, this concept sounds far more prudent than far-fetched.
As relayed in Charlie Leadbeater’s book, We-Think, the tin and copper mines in Cornwall, in the southwest of England, provide another example of how industries can succeed through the dissemination of intellectual property. To make the process of mining easier and safer, James Watt invented the now-well-known “Watt engine,” a design that cut down the amount of coal required by two thirds.14 Watt marketed and sold the engine with his partner, Matthew Boulton, spreading the innovation within the Cornish mining industry. The inventors patented their design and decided to charge mine owners a royalty. Cornish miners rebelled, setting up unauthorized adaptations of the original Watt machine.
In 1811, a group of leading miners founded the Lean’s Engine Reporter, with a mission to collaborate and share ideas on new mining technologies and designs. This generosity and openness spurred innovation. Only a year after the journal was set up, two inventors, Arthur Woolf and Richard Trevithick, introduced a patent-free engine that became the standard. They allowed anyone to copy it. Watt and Boulton never made another sale, and Woolf and Trevithick made a killing installing and iterating on their original engine, fed, of course, by ideas that were circling around a community characterized by sharing.
Informal trading of knowledge can be found in certain pockets today. Engineers from rival firms often share problems they’re working on and offer solutions. In the music industry, managers often share practices with one another. Lady Gaga’s former manager, Troy Carter, told us, “With other managers, I’m extremely collaborative but also very competitive. We share information, problem-solve together. But I still want to beat them.” Because the best practices in the music industry are changing, Carter says it’s impossible to keep up without this kind of open exchange. “I’m one hundred percent okay with people copying. It’s a situation where all boats rise with an idea.”
You wouldn’t expect to find the cooperative misfit instincts at work within traditional industries, but there is a strong tradition of cross-industry agreements. In the energy sector, it is common for companies to pool risk by going in together on upstream projects (searching for underground or underwater crude oil and natural gas fields, drilling, and operating wells). Shell will develop a field with Exxon, and their relative shares of production are proportionate to their equity stake in the project. Shell and Exxon jointly own the oil and production company Aera Energy, for example, with a 52 percent and 48 percent stake, respectively. Another type of joint venture can occur when one company takes the lead on project execution and the other assumes the role of “technology partner” to offset some of the costs.
Some firms have endorsed collective innovation in R&D to help spread the costs of new technologies or materials. For example, Coca-Cola brought together a coalition of companies, including Ford, Heinz, Nike, and P&G, interested in sharing data and best practices around life-cycle assessment (a method for determining the environmental impacts of a product’s life from cradle to grave). This collaboration emerged after Coca-Cola discovered that plant-based packaging was easier on the environment than traditional plastic bottles. Bottle for bottle, plant packaging was too expensive as a substitute, largely because there wasn’t enough demand. Coca-Cola enlisted the support of other companies that could benefit from this approach, thereby increasing demand, stimulating supply, and reducing costs. The result was the Plant PET Technology Collaborative, the aim of which is to accelerate the development of 100 percent plant-based PET materials and fiber.
Where do patents—originally conceived to enable entrepreneurs to recapture the time and money invested in bringing an idea to life—fit into the idea of copying as a strategy of the Misfit Economy? According to billionaire entrepreneur and investor Mark Cuban, the answer is nowhere. “Dumbass patents are crushing small businesses,”15 he says.
Nathaniel Borenstein agrees. A computer scientist, Borenstein was part of the first wave of the open-source movement and developed email systems that could exchange multimedia messages. He sent the first email attachment on March 11, 1992. Borenstein went on to work for companies such as IBM and Mimecast. He explained: “Even where the misfits are successful innovators, they are usually bought out for a song by more sophisticated players.” The patent system, he continued, “almost entirely works for the benefit of large corporations.”
In 2012 IBM received 6,478 patents from the patent office, or one every eighteen minutes per workday.16 Overall, between 1999 and 2008, the top 1.5 percent of patenting firms were responsible for 48 percent of all patents in the United States.17 In contrast, most breakthrough innovations come from the little guy. Inventor Ronald Riley claims that “sixty percent of the National Inventor Hall of Fame inductees were selected for inventions that occurred while they were independent inventors, and not part of a corporation.”18
Top economists at the St. Louis Federal Reserve published a paper in 2013 suggesting there is “no evidence” that patents improve productivity. They argue that patents can pose a threat to innovation.19 Their policy solution? Patents should be abolished altogether. Perhaps it’s about time. Debates around the value of patents and the nature and purpose of “claiming” intellectual property are nothing new. In the nineteenth century, many English anti-patent campaigners argued that innovation wasn’t endowed to a “special breed of heroes” but to the everyman. They felt that the itch to invent was inborn.
In a nod to collective innovation, they didn’t feel that any one inventor could or should claim credit or royalties when “there is no need to reward him who might be lucky enough to be the first to hit on the thing required.”20 Arriving at the invention of the steam engine or the cotton gin was attributed to right time, right place. If you hadn’t done it, well, someone else would have. You just got there first.
It seems, then, that the patent system has always been an instrument of extraction, a collusion between the wealthy and their government. Historian Adrian Johns notes in his book Piracy: The Intellectual Property Wars from Gutenberg to Gates that these same anti-patent Englishmen felt that lower-class inventors were “hopeless in the face of big capital” due to the cost of patent fees, which in 1860 ranged from £100 to £120 (around $585), or approximately four times per capita income. The fee for a patent that also covered Scotland and Ireland could cost as much as £350 ($1,680). Renewing a patent could cost as much as £700 ($3,360).21 While patenting was intended to “protect” the innovators, it brought high costs that only the wealthiest could pursue.
In many ways, intellectual-property pirates exist in response to the inequity of the patent system. They also exist as a counter-force to the monopoly of big business. Within the Misfit Economy, many feel that “ripping off” intellectual property is not only fair but morally justifiable.
As Jean-Phillippe Vergne, coauthor of The Pirate Organization, told us, “pirates emerge throughout history to challenge claims to monopolistic control.” Vergne said that in the seventeenth century, the East India companies claimed rights on all the sea routes they had discovered. But after continued assault from sea pirates, the routes were declared “international waters.”
Look at the ways in which radio pirates in the 1960s in Britain sought to bring an end to the BBC’s domination of the airwaves by broadcasting their own content. Pirate radio stations broke the BBC’s monopoly and forced BBC Radio to restructure and begin offering more diverse tunes. The BBC even went on to hire many pirate-radio DJs for their own stations.
One virtue of copycat innovators is that they can increase the pace of technological innovation and diffusion. In those areas where technologies or products are vital to the public good—such as essential medicines, alternative energy, or telecommunications—copycats can democratize vital products and services.
The success of generic pharmaceutical companies in India and Brazil provided multinational drug companies with real competition. At first these rivals could be found only in domestic markets, but as the manufacturers in India and Brazil scaled up and began exporting, they threatened the multinational companies’ global market share.
India, for example, passed regulatory policies in the 1970s that allowed Indian companies to copy foreign patented drugs without paying a licensing fee. This law stimulated a local self-reliant pharmaceutical industry, as well as enabling more affordable medications. Patients could receive HIV/AIDS treatments that cost as little as $200 per year, compared to their name-brand counterparts at well over $10,000.22
Under new patent law that came into effect when India joined the WTO, Indian drug makers were no longer allowed to manufacture and market reverse-engineered versions of drugs patented by foreign drug producers. Many local pharmaceutical companies went underground. In pushing these players to the black market, quality control suffered. A lot of copycat medications simply didn’t meet standards or didn’t do what they claimed.
In contrast, in Brazil, the government retained much of its bargaining power and didn’t force the copycat industry underground. Many essential drugs were regarded as “beyond patentable.” In 2005 the Brazilian House of Representatives passed a bill that said HIV/AIDS medicines could not be patented.23 Additionally, the same year, Brazil asked foreign pharmaceutical companies to license the generic production of their antiretrovirals for the country’s STD/AIDS program.24
Germany, at the beginning of the twentieth century, did the same by restricting patents on essential goods. Akin to Brazil’s stance in creating “unpatented domains” for essential medicines, Germany legislated that patents could not be obtained for food products, pharmaceuticals, or chemical products. The consequences resulted in “spurred productivity and diffusion in these industries.”25
When it comes to innovations that have a direct bearing on the public good, open licensing—like what the Brazilian government enabled—has become the preferred course. It’s not just governments mandating these approaches. Entrepreneurs and innovators are coming up with flexible licensing and open innovation schemes to enable the most vital innovations to scale.
If you’re like the many millions who download music, movies, and television shows, chances are you have frequented Netflix, the iTunes music store, Spotify, or Hulu. Maybe you’ve frequented all of them.
There is no question that legal music file-sharing programs like Pandora and Spotify are indebted to their illegal forefather, Napster, a program that exploited the vulnerabilities of the music industry and gave rise to a powerful alternative.
Storage services such as Dropbox and Google Drive owe to many illicit pirating sites like Megaupload. Moreover, much of the streaming video technology that now powers services like Netflix and Hulu is owing to the porn industry; porn websites were some of the first to embrace streaming technology.
Many gray-market innovations—whether streaming technology or file-sharing functionality—preceded more lucrative and legal business opportunities. In both the file-sharing and streaming markets, these platforms have transformed how the industry perceived entertainment content from something that users owned to something that they borrowed or rented. What the second wave of platforms (Hulu, Netflix, Pandora, and Spotify) enabled, however, was a sanctioned etiquette around file sharing.
Strict file-sharing sites had no way to reimburse content creators; hence the continuing outrage of many musicians, artists, and entertainment companies. After facing accusations that it was ripping off its artists, Pandora released figures suggesting that more than 2,000 of its artists would make $10,000 in the next year, while more than 800 were paid over $50,000. Popular artists like Adele, Coldplay, and Lil Wayne made over $1 million annually from the site.26 By comparison, Spotify has paid out (as of November 2014) over $2 billion U.S. in royalties to the music industry since its launch in 2008.27 The amount that each artist receives is based on his or her popularity.
Video-sharing companies like Hulu and Netflix have also stayed true to this etiquette, paying content providers through adapted business models built on revenue from subscription memberships. As of December 2013, Hulu had five million subscribers to Hulu Plus, its premium service, and was projected to reach $1 billion U.S. in revenue.28 Meanwhile, Netflix has more than fifty million members worldwide29 and has struck an exclusive three-year deal with Disney estimated at $300 million U.S.30
While these platforms use traditional licensing arrangements to compensate content providers, they also face competition from illegal file-sharing platforms. The irony is that businesses like Hulu and Spotify would have had a harder time getting off the ground if illegal file-sharing platforms hadn’t disrupted the industry.
Some illegal websites that host pirated movies and television shows are still instrumental to the development and growth of the legal entities. When Netflix introduced service in the Netherlands, the company made clear that it used information from pirate websites to decide which shows and films to buy and offer. Kelly Merryman, the company’s vice president of content acquisitions, told Tweakers, a Dutch website dedicated to covering all things tech: “With the purchase of series, we look at what does well on piracy sites.”31
Artists are finding ways to beat the illegal downloading craze and evolving with the times. In the face of file-sharing politics, some artists have gotten creative. Rather than release a standard album, Beck released Beck Hansen’s Song Reader, which consisted of sheet music rather than recorded songs. If fans want to hear it, they have to play it themselves. Such a step enables less passive consumption of content, as fans are given a role in bringing the music to life.
In his book Where Good Ideas Come From, Steven Johnson states:
“Protecting ideas from copycats and competitors also protects them from other ideas that might improve them [and] transform them . . . to true innovations.”32 Increasingly, misfit innovators are recognizing this and choosing to integrate copycat etiquette into the DNA of their own businesses.
Stephen Song, the founder of Village Telco,33 subscribes to copying as “innovation for the public good.” His company, which builds low-cost community telephone network hardware and software, aims to make starting a telephone company as easy as starting a blog. Song and his team designed the phone networking technology—which allows a phone company to be set up in minutes anywhere in the world, without the need for mobile phone towers or landlines—but refused to patent it. Instead, they gave the design to a manufacturer, who in turn agreed to produce the hardware cheaply and stay open to further design iteration by others.
By open-sourcing his technology, Song created what he calls “a fast track toward trust.” Village Telco now has a network of more than five hundred people around the world who contribute to its technology faster than it could on its own. One user sought to customize the company to better serve local environments and small businesses. Now 30 percent of the community is using his version of the product rather than the original one.
Brazilian innovator Sergio Prado found a way to use patents for (public) good and not evil. “A patent is only a unit of information,” Prado told us when describing how and why he has gone about patenting his process for creating construction materials out of waste. For Prado, patents are a way to package his solutions for greater scale. As he described, “Our objective is that the patent does not prevent the adoption of the innovation, but instead allows for immediate international collaboration to develop, test, and produce new building materials and housing applications at scale.” Because Prado’s patented solutions are for the public good—not only enabling reduced waste but also providing affordable housing—he allows for flexible licensing, encouraging others to make free use of his patented methods.
A similarly collaborative spirit underpins Copyleft, a form of licensing popularized in the open-source community, whereby a software program is put into the public domain with the condition that any use, modification, or redistribution of that program’s code must also be put into the public domain. This requires programmers who build on a program to share their innovations with the original programmers and the community at large.
In the race to decode the cocoa genome, Howard-Yana Shapiro and his team took a similar tack. At confectionery manufacturer Mars Incorporated, Shapiro led the charge to sequence the genome, then put everything he’d learned into the public domain. He remembers the conversation in which he was granted permission lasting about five minutes: “I’d like to sequence the cocoa genome. I’ll need six to eight million dollars to do it. And I want to give it away and put it in the public domain.” And so it was.
Shapiro didn’t stop there. Today he is working to sequence ninety-six orphan food crops. Orphan crops represent vital nutritional food crops for subsistence farmers across Africa, Asia, and Latin America: cowpeas and mung beans (legumes), amaranth, sorghum, pearl millet, and teff (cereal grains). In his words, “These are poor people’s crops; it doesn’t make sense to hold on to the intellectual property.” In addition to sequencing the crops, Shapiro is working with plant breeder networks in Africa to ensure that the crops can be distributed.
Some people think he is outright crazy; others fear that the scale of what he is trying to accomplish is too grand. However, Shapiro is on a mission to change the conversation—not only about sequencing but about the notion of intellectual property. “We gave away dominance of this commodity [cocoa] because it touches the livelihood of subsistence farmers. Why would we want to own it, defend it, and restrict its use when that could have negative consequences on people’s livelihood?”
Similarly, Chas Bountra, another misfit whom we met, is trying to change pharmaceutical R&D. With over two decades of experience at GlaxoSmithKline, Bountra heads up the Structural Genomics Consortium at Oxford University. He is working on creating pre-competitive R&D.
Bountra is looking for investors and industry competitors to commit funds to develop new therapeutic targets. R&D budgets and targets are agreed upon and invested in; only when drugs reach Phase III trials will commercial sponsors be able to buy the drugs to bring them to market. Through this approach, Bountra hopes to bypass considerable R&D waste and redundancy. Currently, a pharmaceutical company will work on a therapeutic target that another may have found to be a dead end, but because the companies are competing, there is no incentive to share these dead ends: It is to one company’s advantage to waste another’s resources. Bountra’s approach will create pre-competitive infrastructure that allows companies to cooperate on R&D while still competing to bring drugs to market.
Innovators like Bountra and Shapiro show us the importance of not being afraid to reach out to competitors to work on areas of shared vulnerability. Pre-competitive arrangements have historic precedent and may be needed now more than ever as core sectors of the economy—energy, pharma, and food—rethink their business models.
There are justifications for copying (good for business, good for humankind) when you are the copier. But what if you are the one being copied?
Eric Rosenbaum is one of the creators of MaKey MaKey, an “invention kit” that makes it easy to turn ordinary household objects into video game controllers (turn bananas into piano keys, create a joystick out of a pencil drawing). Eric and his business partner, Jay Silver, used Kickstarter to raise funds for their project. With an initial goal of $25,000, Rosenbaum and Silver ended up raising $568,106.
What makes this case study interesting is how two fringe cultures of innovation—the open-source culture and the shanzhai culture of pirated innovation—collide. Through a strange series of events, Rosenbaum and Silver discovered a clone of their idea, called DemoHour, on a Chinese Kickstarter site. And the MaKey MaKey founders didn’t like it.
It wasn’t so much that the Chinese borrowed elements of their idea: MaKey MaKey is open-source, which means it is available for change and iteration. It was the way they went about it. The Chinese company relaunched the MaKey MaKey campaign word for word. They didn’t differentiate from the MaKey MaKey product at all. And they hadn’t attempted to contact Rosenbaum or Silver for permission. Nevertheless, the idea was a success in the Chinese market, as the Chinese company ended up raising over 326 percent of their fund-raising goal (or 16,346 yuan / $2,635 U.S.).
In this instance, there was a clear etiquette failure. If the Chinese copycats had contacted MaKey MaKey or sought to collaborate or even paid homage to the original innovators, it would have been a different story. Much copycat behavior boils down to etiquette. If you are learning and borrowing from others, it’s important to acknowledge them.
Andrew Weinreich, a New York–based entrepreneur and creator of Six Degrees, one of the first social networking sites, has experienced being copied. Founded in 1996, Six Degrees was based on the popular idea (and Kevin Bacon game) that everyone is connected through six degrees of separation. Six Degrees essentially provided the ability to “see” people you didn’t know through the network of people you did. What’s interesting is that without photographs, all you would see was a list of friends in common.
While many of us are all too familiar with Facebook, MySpace, and even Friendster, Six Degrees is a relative unknown. It wasn’t a flop by any means. At its height, the site had more than a million users and a hundred employees. Its functionality was patented (now held by LinkedIn). In December 2000, Six Degrees was sold to Youthstream Media Networks for $125 million. A success by all accounts.
We asked Weinreich whether it upset him to see Six Degrees fade away, only to be replaced by other, wildly successful social networking sites. Did he resent Mark Zuckerberg and the success of Facebook?
“Absolutely not,” Weinreich told us. “When people copy stuff that is contemporaneous, it is more upsetting than when they do it later.” So time and space make copying easier to take. He added: “It’s weird today to come up with an idea that nobody is doing.”
Six Degrees was launched eight years before Facebook. At the time, the technology landscape was different. Weinreich told us how, when he was running Six Degrees, the top request from users was to be able to post a picture with a profile, but few had digital cameras. Camera phones didn’t exist in the consumer market.
While it seems unimaginable now, Weinreich remembers thinking about what Six Degrees would need to provide for people to send in a physical photograph. His team would need to scan it and upload it to the site. “We were literally thinking about the assembly line required for people to send in photographs. And then the dot-com bubble burst, and shortly thereafter we went from a world where there were no digital cameras to [a world where] everyone [had access to] digital photography.”
In Weinreich’s mind, Facebook never would have succeeded to the degree that it has without digital photography. (Facebook is the largest repository of photos in the world, with more than 250 billion photos, according to Mashable.34) Its superior execution over competitors like MySpace (which had a far less user-friendly interface) also mattered. That Facebook came along much later meant Weinreich was less bothered by the platform’s success. While copying can be infuriating, it can play an essential role in hastening innovation.
It’s important to remember that the person who comes up with an idea is not always the best person to execute it or see that idea scale up. If you are a creative sitting on a fountain of ideas, be sure to emphasize execution over ownership. Don’t get caught up in a childish game of “mine.” It isn’t what you are able to think up or imagine but what you are able to do that matters. And if you are on the other side—the person taking someone’s idea to the next level—then pay homage to the innovator. Flattery can go a long way.
IN EXPLORING THE WORLD OF misfit copycats, we have seen virtue in the practice of copying. While we don’t encourage or condone theft of intellectual property, we believe that there is great value in willingness to look to others for inspiration, and to build on their ideas with enhancements and improvements. We believe this form of collective innovation is intrinsic to the creative process and that this spirit should be harnessed in the formal economy, to accelerate the diffusion of innovation and to help avoid the establishment of monopolies.
We have observed the creativity of copycats who, without the burden of an emotional attachment to their inventions, have adapted their products to better suit the needs of their market. And we have learned that the success of an enterprise can be more a function of execution and timing than of having a brilliant original idea.