from the tweakonomics dept
Don't forget that tomorrow we'll be running our chat with Andrew Norton about his book No Safe Harbor. However, today we're announcing this month's book club book of the month: The Knockoff Economy: How Imitation Sparks Innovation, which has just been published by Oxford University Press. The authors, Kal Raustiala and Chris Sprigman, will be sharing a series of excerpts from the book over the next few weeks, and then will join us for a chat as well.
In this excerpt from
The Knockoff Economy, we want to highlight an important facet of innovation that deserves more attention. Innovators, like innovations, come in different varieties. Consider one major distinction among innovators. Some innovators come up with something radically different from anything that has been done before. These people—the Thomas Edisons of the world—are the kind that we're likely to call to mind when we think about innovation. We will call them “Pioneers.” But the Pioneers aren't alone. There are many innovators who improve ideas and products by refining or reconceptualizing what others have done. This type of innovator adds something new to a familiar way of doing things, improving and refining it. We will call these people “Tweakers.”
Tweakers do not get nearly the attention that Pioneers do. In particular, legal rules about copying are generally focused on the interests of Pioneers. As many observers have noted, IP law often reflects a romantic notion of the lonely Pioneer, toiling away in obscurity while creating a new and great invention. Tweakers, on the other hand, are mostly an afterthought. Yet Tweakers can be very important to the development of successful, effective innovations.
To see how, it's instructive to take a close look at MathWorks, a Natick, Massachusetts, firm that produces software for engineers and scientists. MathWorks has sponsored a series of online programming contests to promote their MATLAB programming language. In these contests, contestants try to write a program that solves a single difficult math problem in the least amount of time. An example is the classic traveling salesman problem, in which contestants compete to find the shortest possible round trip a salesman can make through a given list of cities. Contestants write computer code to calculate the shortest trip, and then submit the code to the MathWorks contest Web site. Their code is graded not only for how closely it approaches the optimal route but also for how quickly it produces the answer.
Contestants can submit as many entries via the MathWorks Web site as they like over a period of several days. Each is scored and the rankings made continually visible to all. At the end of the contest, the winner receives a MathWorks T-shirt and public acknowledgment of his or her victory. That’s it. And for this, quite a few highly skilled people will spend a lot of time—sometimes more than a hundred hours—writing code. A chance at glory within the programming community means a lot.
Yet here’s an even more surprising twist: after a short initial period of “darkness,” where the submitted code is hidden from other participants, the contest is played out in “daylight”—all of the contestants get to see each others’ code. And they not only get to see—
they are allowed, indeed encouraged, to take and tweak what they see.
These rules lead to an innovation environment that looks a lot like what we see in many real-world markets. Some contestants are Pioneers—they work out a fundamental insight that helps address the problem and submit code embodying it. Others are Tweakers: they take code from their Pioneer rivals, improve it, and resubmit it.
As more and more Tweakers wring the flaws out of a Pioneer's code, the solutions to the problem get better and better. More subtly, as the Tweakers push any particular Pioneer's solution toward its best implementation, the limitations of the Pioneer's original insight become apparent. In this way, the Tweakers help to prepare the ground for the next Pioneer—someone who comes in with radically different code that avoids the bottleneck that limited the performance of the previous best solution.
OK, you say, so the Tweakers create some value. But doesn't any set of rules that promotes tweaking crush the incentive to be a Pioneer? Why would anyone want to work out a pioneering approach to a math contest problem if a Tweaker can simply take it, fiddle with it a bit, and leap ahead in the contest?
Ned Gulley, the MathWorks guru in charge of the contests, has suggested an answer:
We find that tweaking is the thing our contestants most often complain about, and at the same time it is the feature that keeps them coming back for more. Our discussion boards swirl with questions like this:
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Who deserves the most credit for this code?
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Who is a big contributor and who is “just a tweaker”?
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What is the difference between a significant change and a tweak?
These kinds of questions bedevil real-world software projects. There seems to be a cultural predisposition to find and glorify the (often mythical) breakthroughs of a lone genius. Since this model doesn't always match reality, these questions don't have satisfying answers. Happily, the contest framework acts as a solvent that minimizes this kind of I-did-more-than-you-did bickering and maximizes fruitful collaboration among many parties. . . . Part of this successful formula is the fact that we don't offer valuable prizes to the winners of our contest. The primary reward is social. [B]y way of analogy, suppose Wikipedia contributors were paid large sums of money based on how many of their words persisted in the articles they touched. You can imagine the noise that would result. An enterprise held together by reputation is easily damaged by cash.
The MathWorks experience shows that there is nothing inherently unjust or incentive-destroying about tweaking. Instead, it suggests that people view imitation differently in different contexts, depending on their expectations and the norms of that particular world. Although participants in the MathWorks contests may complain about tweaking, they by and large accept it when they know in advance that it is part of the rules.
Ned Gulley believes that part of the reason Tweakers are accepted in the MathWorks contests is because no real money is at stake. But in football, as we explain in Chapter 4 of
The Knockoff Economy [not excerpted here], where big money rides on every game, we also see lots of tweaking. And we also see a surprising amount of information sharing that leads to tweaking. Former University of Michigan head coach Rich Rodriguez, for example, for many years ran summer camps where coaches came to learn his spread-option. And as the
New York Times described in 2010, New York Jets head coach Rex Ryan’s off-season training camps have become a Mecca for coaches seeking inspiration:
This is all why, throughout this off-season, springing up like gladiolus along the sidelines of Florham Park, [New Jersey—the Jets’ practice facility], were dozens of coaches in polo shirts and twill slacks, with return airline tickets to Indiana or Hawaii on their hotel bureaus. One week, Jon Gruden, the broadcaster and former Raiders coach, came up from Florida to take the Ryan cure. Then it was Nick Saban of the University of Alabama, college football's defending national champion, reviewing blitzes. “We’re all copycats,” Saban says. “I haven't invented anything in this business. I’ve always watched what Rex does.”
Coaches are free to copy in football. Many do, and copying is considered neither illegal nor immoral. As a consequence, we see hardly any handwringing about it, because it is part of the background culture and people expect great ideas to get imitated. In this way, we see that sometimes the rules don' follow morality, but rather that morality follows the rules. What is normal becomes moral.
There is another example of tweaking so commonplace that we hardly notice it, yet it is central to one of our most vibrant art forms. American copyright law normally forbids the tweaking of creative works unless the creator gives permission. For the last century, however, there has been a different rule for songs—actually, to be precise, for
musical compositions, as opposed to
recordings of those compositions. This special rule for musical compositions gave birth to what today we know as the cover song. The cover artist must pay something to the original songwriter if she sells recordings of the song. But she doesn’t have to ask permission to cover the song and reinterpret, and tweak it, as she sees fit.
Why does American law contain this unusual exception for cover songs? The story concerns an interesting historical accident. In the early days of copyright, the rules about music were straightforward for a simple reason: at the time, there was no way to record music or to mechanically reproduce it. Music existed on paper (in the form of sheet music) and in the air during live performances. Copyright law prevented—at least in theory—the unauthorized copying of sheet music, which was the only copying possible.
That all changed after the Civil War, with the invention of the player piano. By the 1890s player pianos were widely distributed in the United States. (The phonograph was invented at about the same time and it too was everywhere by the early 20th century.) The player piano deeply troubled popular music composers such as John Philip Sousa. Sousa worried that the pianos would kill the public’s demand for sheet music, and sheet music was the source of composers’ copyright royalties. To make matters worse, the player piano companies refused to pay royalties to composers for the songs they put on player piano rolls. These rolls were scrolls of paper with holes punched out in patterns that instructed the piano how to play a particular song. The rolls, argued the player piano companies, did not “copy” the composers’ musical compositions. As a result, they were perfectly legal.
As Sousa knew, that argument was more than a little disingenuous. Sheet music “copies” a song by rendering it into musical notation—symbols on paper that tell a musician how to reproduce the song. In a similar fashion, a player piano roll “copies” a musical composition by rendering it into a different sort of musical notation—holes punched into paper that tell a machine how to reproduce the song. Sheet music and player piano rolls are essentially the same instructions, just written in different languages. Nonetheless, the Supreme Court, in its 1908 opinion in
White-Smith Music Publishing Co. v. Apollo Co., sided with the player piano companies. The Court held that because humans could not read player piano rolls, they were not in fact copies of the musical compositions they encoded.
The result in
White-Smith lasted but a year before it was overturned by Congress. The Copyright Act of 1909 extended the law to cover all “mechanical” reproductions of musical compositions, whether they could be read by human beings or not. With this action, however, Congress mandated that all musical compositions would be subject to what is called a “compulsory license.” In short, since 1909 the copyright law has allowed musicians to copy others’ songs without asking permission, so long as they paid a specified fee to the original songwriter.
Why did Congress create this system of copying? Because they feared the power of the Aeolian Company.
Who? Aeolian is a long-vanished manufacturer of pianos, player pianos, and organs. (Aeolian declared bankruptcy and disappeared in 1985.) But back in the first decade of the 20th century, when player pianos were the hot new technology, Aeolian was a dominant firm—the Microsoft (or perhaps Google) of its day. Anticipating that Congress was about to overturn
White-Smith, Aeolian moved swiftly to buy up song rights from musicians and publishing companies so it could copy them onto player piano rolls. Aeolian’s competitors quickly complained to Congress about Aeolian’s attempt to corner the music market. Congress responded with the invention of the cover song rule.
The immediate result was that Aeolian’s competitors gained the right to make their own player piano rolls, so long as they paid the fee. That was Congress’s intent: to keep the Aeolian Company from having a monopoly on the then-crucial player piano roll market. The longer term result was much more significant: because of Aeolian’s dominance of a now-defunct technology, we have a musical culture in America in which musicians are free to tweak songs they like—and they do so with great enthusiasm. Bob Dylan wrote “All Along the Watchtower”; Jimi Hendrix tweaked it into something quite different and, arguably, made a great song even greater. Another 1960’s classic, Van Morrison’s “Gloria,” has been covered by performers including Jimi Hendrix, the Doors, David Bowie, Tom Petty, Bruce Springsteen, Rickie Lee Jones, AC/DC, and Patti Smith, in perhaps the song’s most memorable and inventive reinterpretation. “Gloria” is an enduring song in part because so many legendary musicians have tweaked it. Cat Power, John Lennon, Willie Nelson, Paul Anka, and many other famous artists have issued albums of nothing but cover songs. All this (legal) tweaking has made our musical culture immeasurably richer.
But has the freedom to tweak others’ songs, in exchange for a very low fee that the original songwriter has no power to override, suppressed the incentive to write new songs? There’s no evidence of that. Indeed, every day we see a continual outpouring of new musical compositions. Tweakers and Pioneers co-exist comfortably in the world of music. It is sometimes hard to tell them apart, in fact. Think for a moment about jazz greats like Charlie Parker and John Coltrane. On one level, they are Tweakers—Coltrane’s version of the Rogers and Hammerstein standard “My Favorite Things” recognizably appropriates that song’s famous melody. But if Coltrane starts there, it’s certainly not where he ends up. By the song’s end more than 13 minutes later, Coltrane has tweaked the original melody and taken it in a much darker, more contemplative direction. At some point in the song, Coltrane crosses the uncertain border that separates Tweakers from Pioneers.
In sum, tweaking is not just something done by football coaches or software engineers. Tweaking is present in all inventive fields, and in some—like music—is a very prominent part of the creative process. Perhaps the most important point about tweaking is this: tweaking does not appear to suppress pioneering innovation very much. If anything, it may often encourage it. Many of the most significant and enduring innovations rest on tweaking. As Malcolm Gladwell has argued, the late Steve Jobs of Apple—an icon of our innovation economy if there ever was one, and the man behind the iPhone and iPad—“was repeatedly referred to as a large-scale visionary and inventor.” But in fact, “he was much more a tweaker.”
Steve Jobs, Gladwell goes on to argue, was “the greatest tweaker of his generation.” Even the iPad, Jobs’ last great success, was a tweak of an idea out of Microsoft. And Gladwell rightly points out that the significance of tweaking to technological innovation is by no means just a New-Economy thing: economists debating the origins of the industrial revolution have claimed that the key reason Britain, and not France or Germany, was the first home of the industrial age was tweaking. As Gladwell describes their argument, Britain was not necessarily the home of pathbreaking Pioneers who created the foundational building blocks of the industrial revolution. Rather,
Britain dominated the industrial revolution because it had a far larger population of skilled engineers and artisans than its competitors: resourceful and creative men who took the signature inventions of the industrial age and tweaked them—refined and perfected them, and made them work.
Filed Under: innovation, knockoff economy, tweaking
