Smartphone, Dumb Government

Google’s new Motorola unit had great ambitions to serve customers and keep dazzling us with ever more spectacular things that enhance our lives. After all, the smartphone is easily the greatest consumer innovation of our time, and maybe of all time. It accomplishes amazing feats in a tiny package and represents a greater achievement of the human mind than anything accomplished by government, ever.

The smartphone is really misnamed in so many ways. Depending on apps and extensions, it provides maps and global positioning, checks your blood pressure, becomes a musical instrument, allows you to buy and sell stocks from the middle of nowhere, to enjoy video chats with people from all over the world, to assemble friends and networks, and to keep up with and send messages to anyone.

It allows me to make my own movie on the fly and broadcast it out to billions in a matter of minutes. I can record a song. I can immediately make anything happening in front of me become a live stream to the whole world, and do this without paying any expensive fees. I can conduct an interview and archive it on my own channel, which I can create in a few seconds. Or of course, I can play one of thousands of games.

It’s a calculator, an email checker, a weather updater, a camera, a Web browser, a news reader, a complete stereo system, a book reader, a translator, a scanner, and a miniature everything all in a thing the size of a deck of cards that is half as thick. The innovations pour into this tiny miracle by the day, by the hour ,even. And it’s only begun: The app economy holds out the promise of astonishing innovation down the road.

I recall many times suggesting to people that they replace their old cell phone (which itself is a great gizmo, given that only the richest of the rich could afford such a thing in the 1980s) with a smartphone. They demure and refuse and finally give in, and only then do they realize what they’ve been missing. It’s a revelation, a childhood dream come true.

So what does Google plan to do with its new Motorola acquisition? Serve up some more wonderfulness to a public ready to be amazed again? Not yet. It’s first step was to file a massive lawsuit against iPhone. And why? You guessed it: patent infringement. Google claims that Apple has stolen some of Motorola’s technology.

Apple has systematically refused to enter into any reasonable licensing deals, which is exactly the same behavior that Samsung faced before. And Google is not stupid. The whole world was watching that lawsuit that Apple filed against Samsung, and saw how a tired, confused, and technologically dumbfounded jury, in a courtroom 10 miles from Apple’s headquarters, agreed to a $1 billion-plus judgement against Samsung.

Google won’t just take this lying down. It decided to act first rather than risk that kind of aggressive attack. It is asking the International Trade Commission to start blocking all imports of iPhones, iPads, and iPod Touch. Crazy, right? Does Google hate our guts that it would seek such a result? After all these years of desperately serving the Web-surfing world, giving us amazing tools for free and revolutionizing the world of advertising, has it now decided to spread misery to the American public?

Nope, it’s all about defending itself against aggressive attack. What the jury did in the case of Apple v. Samsung has set off a deadly arms race. An industry that became thrilling and gigantic, and has brought unprecedented progress, is now entering into a dangerous period in which dogs really do eat dogs, where one company’s win is another’s loss, and where the welfare of the consumer has to be put on hold for the battle of the titans.

The problem comes down to one word: patent. In the 1980s, patents were extended to cover software. This was the beginning of what would become a catastrophic regulatory thicket that would ensnare every producer and where the lawyers would make out like bandits no matter who won.

When patents first came along in history, they were monopoly privilege granted by the crown in exchange for political subservience. This was the age of mercantilism, and it gradually led to the age of capitalism, in which trade barriers, taxes, and regulations fell. The slogan was laissez faire, or, leave commerce alone to manage itself. Government can’t improve on the results of the market process.

The patent today is a holdover from the pre-capitalistic age. It was not very controversial before the digital age, because economic progress was relatively slow and patents expire and because the patents didn’t apply to most of the important consumer products we use every day. But the problem with them has always been the same: By granting a right of exclusive production to one firm, patents attack the competitive process as its very root.

The competitive process takes place over several phases, which constantly overlap. There is innovation (always an extension of what came before). Then with innovation can come a period of profitability. This profitability attracts other producers to the industry who innovate further and try to improve the good or service. The initial producer then has to scramble to maintain market share, and it does so through innovation and price cuts.

Note that the whole system is based on the ability to learn from others. Good companies emulate the successes of others, avoid their mistakes, and improve what exists at the margin. That’s the essence of economic progress. This is how competition results in the biggest conceivable boon for consumers.

As Steve Jobs said in 1994, “We have always been shameless about stealing great ideas.” So it has been for every great painter, poet, and entrepreneur. They build on what came before. I take issue only with the use of his word “steal.” When you copy an idea, there is not a thief and a victim, but two ideas. This idea-copying process extends to infinity.

Who in the business world likes the idea of competition? The startups like it. The innovators like it. Young companies seeking to change the world like it. Competition gives them an opportunity to make a difference and build wonderful things. But older companies do not like it. Once they get on top, they would much rather rest on their laurels.

In a market, they cannot rest. But with patents, they can sue. They can use the tools of government to clobber their competition. If it works, they can receive what amounts to a bailout. To win a patent suit against the competition is no different from getting a tariff erected against imports, having your insurance company get a huge cash infusion from the Department of the Treasury, or for a labor union to block low-price workers from entering the market.

The real story of Apple’s attack on Sumsung is told in the numbers. Apple has been dramatically losing market share to the competition. That’s no surprise: The first to market experiences a period of profitability above the average rate of return. But then others emulate and improve at the margin. Prices fall, service improves, and great things happen for everyone except the former industry leader.

Patents are an occasion of sin. They tempt business to go to government to smash their competition, instead of turning to more-innovative strategies to attract consumers. This is why industries without patents are so vibrant. Patents don’t apply to fashion, recipes of all your favorite meals, to plays in sports, and to most things we use and love.

I can hold up my Wal-Mart navy blazer and one from Burberrys and, from a distance of three feet, you couldn’t tell much difference. But both manage to exist side by side in peace, and everyone wins. But the jury in the Apple v. Sumsung case looked at the two phones and said: oh this are really too similar, so one has to go!

Patents established government-protected monopolies. Ironically, other divisions of government claim to intervene in markets to bust up monopolies and divide up market share. Either way, the government is doing central planning by picking winners and losers in the marketplace rather than let the competitive process play itself out.

What happened to Apple really amounts to a government-sponsored bailout, no different from that won by AGI in 2008. But do we recognize it as such? Probably not, because the whole racket is couched in the language of a law that few people understand or question.

Jeffrey Tucker

Written By Jeffrey Tucker

I'm executive editor of Laissez Faire Books and the Chief Liberty Officer of Liberty.me, an innovative private society for publishing, learning, and networking. I'm the author of four books in the field of economics and one on early music. My personal twitter account @jeffreyatucker FB is @jeffrey.albert.tucker Plain old email is tucker@liberty.me

  • Fitness Games Don't Work. Here's What Does...

    Fitness Games Don’t Work. Here’s What Does…

    Chris Campbell

    by Chris Campbell
    On Feb 9, 2015

    A mysterious alien race is invading planet Earth. And those “in the know” are splitting into two camps. You might not know it, but you and your health are in danger. Chris Campbell reports. Read on…

  • The Great "Digital Nomad" Challenge (Are You Game?)

    The Great “Digital Nomad” Challenge (Are You Game?)

    Chris Campbell

    by Chris Campbell
    On Jan 22, 2015

    What is a digital nomad? Why is this strange creature guilty of "currency arbitrage"? Why is it awesome? Chris Campbell investigates. Read on...

  • Motorbikes, Cockfights, and Laser Beams

    Motorbikes, Cockfights, and Laser Beams

    Chris Campbell

    by Chris Campbell
    On Jan 20, 2015

    The adventure begins. Chris Campbell reports in from Bangkok. And you’ll never believe what he’s already gotten himself into. Read on…

  • Blowing Smoke Up Your Butt

    Blowing Smoke Up Your Butt

    Chris Campbell

    by Chris Campbell
    On Jan 7, 2015

    Do you know where the expression “blowing smoke” comes from? From an old -- and very strange -- medical device. You won’t believe what else Chris Campbell has unearthed from the olden days of strange medicine. Read on…

  • SPACE: The Final Frontier Begins

    SPACE: The Final Frontier Begins

    Chris Campbell

    by Chris Campbell
    On Nov 18, 2014

    Would you leave Earth to help colonize another planet? This might sound like an absurd question, but, according to many leaders of thought, its one we might have to confront sooner than later. Chris Campbell explores our journey from air to space, and ponders where we’re off to next. Read on…

  • HowToGrabYourPiece

    How to Grab Your Piece of the $240 Million Secret Market No One Knows About

    Ryan Cole

    by Ryan Cole
    On Feb 9, 2015

    In December last year, a lot of people were laughing off an inept thief. Not only did Charles Jennings, a cargo worker, quickly get caught — but his $1.5 million haul was snicker-worthy. Who’d want his product? How on earth could he sell the 7,500 pieces — or move them anywhere near that $1.5 million retail price tag? How dumb could he be? Here’s the thing — all the people snickering don’t know what they’re talking about. The $1.5 million stash? On the open market, it could easily be worth twice that. Heck — it could be worth 10 times as much or more. And moving it would be easy.

     

  • How to Blow the Whistle (and Not Live to Tell the Tale)

    How to Blow the Whistle (and Not Live to Tell the Tale)

    Chris Campbell

    by Chris Campbell
    On Sep 29, 2014

    If you’ve ever wanted to expose some heinous crime against humanity, here’s your chance. In today’s Laissez Faire Today, Chris Campbell shows you how to make sure the world accesses to your leaks, even if something happens to you. Chris also shares why this is probably a terrible idea. Read on…

  • Edison’s Secret Energy War is Back (Here’s How to Cash in)

    Edison’s Secret Energy War is Back (Here’s How to Cash in)

    Chris Campbell

    by Chris Campbell
    On Sep 23, 2014

    Over a century ago, a hidden energy war began. The bad guys won. For 100 years, man has been a slave to the energy monopolies. But now, miraculously, the good guys are throwing a punch -- and they’re inviting you to fight the good fight. Even promising riches if you do. Chris Campbell fills you in on the full story. Read on…

  • Thrive in Chaos: The Ancient Secret to Self-Sufficiency

    Thrive in Chaos: The Ancient Secret to Self-Sufficiency

    Chris Campbell

    by Chris Campbell
    On Sep 22, 2014

    An ancient guide has been in hiding… until now. As it dusts itself off, some early adopters are calling it “the definitive text on self-discipline, personal ethics, humility, self-actualization and strength.” And, according to Chris Campbell, it could be the only thing you need to thrive in our day-to-day life of modern chaos. Embrace it, and become the hero of your own story. Ignore it, and risk living a whimper of a life on someone else’s terms. Read on…

  • The 3-D Printing Story You Weren’t Told (and How it Ruined My Face)

    The 3-D Printing Story You Weren’t Told (and How it Ruined My Face)

    Chris Campbell

    by Chris Campbell
    On Sep 18, 2014

    “What… is… that?!”That’s what one colleague asked when she saw this on my desk…My face, according to 3-D printing“My face,” I said. “What does it look like?”“Uh…”OK, sure. It’s a rough depiction. Eh. It’s pretty choppy…And, as you can see, the glasses didn’t really take well… making for an eerie sunken eye look.Didn’t really turn […]

  • VC Barrel Tasting with Cris

    The Wine World’s “Hatfields and McCoys”

    Joe Maga

    by Joe Maga
    On Feb 4, 2015

    Among red wines, two varietals are often latched onto by certain enthusiasts. “I only drink cabs,” or, “I only drink pinots.” Such statements are common surrounding these wines. Pinot noir and cabernet sauvignon: two wines with very different bodies, styles and flavor profiles. In my experience, those who “only” drink one usually cannot relate to those who “only” drink the other. The Hatfields and the McCoys of the wine drinking world.

     

  • Bitcoin: Buy Now or Forever Hold Your Peace

    Bitcoin: Buy Now or Forever Hold Your Peace

    Chris Campbell

    by Chris Campbell
    On Sep 17, 2014

    Bitcoin has been pretty quiet lately. But that doesn’t mean big things aren’t taking place behind-the-scenes for the digital currency. In today’s Laissez Faire Today, Chris Campbell pulls back the curtain and shows you how Bitcoin is quietly slipping into the mainstream. He also shows you why now could be the time to buy now, or forever hold your peace. Read on…

  • Net Neutrality: The Story Not Being Told

    Net Neutrality: The Story Not Being Told

    Chris Campbell

    by Chris Campbell
    On Sep 12, 2014

    In an odd mix of fate, protesters and corporations are holding hands. They both have one common goal: save the Internet from the evil cable companies. We all have a common hate for them. But what if the cable companies aren’t as evil as once thought? What if there’s an even bigger evil lurking behind them? There is. Read on…

  • The Only Way to Get Rich: A Zen Proverb

    The Only Way to Get Rich: A Zen Proverb

    Chris Campbell

    by Chris Campbell
    On Sep 10, 2014

    Want to get rich? Don’t listen to financial “gurus,” says Chris Campbell. In today’s Laissez Faire Today, Chris shares a Zen proverb and shows how understanding it is the only real way to get rich (and live a rich life). Read on…

  • HappyFamily

    One Free Website to Keep Your Family Safe

    Chris Campbell

    by Chris Campbell
    On Sep 9, 2014

    Ben Franklin once said, “An ounce of prevention is worth a pound of cure.” In today’s Laissez Faire Today, you’ll learn about one FREE website that has the potential to not only keep your family safe – but also open your eyes to what’s happening in your own neighborhood. Chris Campbell has all the details. Read on…

  • BiggestLandlord

    Triple-Dip on Profits With America’s Biggest Landlord

    Zach Scheidt

    by Zach Scheidt
    On Feb 4, 2015

    Last month, when renewing our health insurance, our carrier screwed up, leaving the entire Hill family without dental coverage... Their incompetence, however, opened our eyes to burgeoning alternatives in the health care space. To be specific, we were able to save $88 on our recent dental visit despite not having insurance. And it was all thanks to a little slip of paper that took us five minutes to acquire and cost us nothing.

     

  • Youre_Incredible

    Use “Power Gaps” to Build Your Own Empire

    Chris Campbell

    by Chris Campbell
    On Sep 8, 2014

    All over the world, power is dying. The dictators and tyrants of the world are no longer able to wield it like they once used to. And they’re losing it to the “little guy.” Chris Campbell shows you how to be the king of your castle by taking advantage of this fact. Today, you’ll learn how to grab “power gaps” in the market and channel them into your product idea or project. Read on…

  • http://pro1.lfb.org/257033?email={emailaddress}

    Cash in on the Hidden Sex Boom

    Chris Campbell

    by Chris Campbell
    On Sep 5, 2014

    Chris Campbell got more than he bargained for during Sunday brunch. In a packed restaurant, he learned about a hidden sex boom that’s taking the world by storm. You won’t believe how much money ordinary Americans are making in this boom. It’s so much…you may even consider cashing in yourself.

  • Hacker

    Celebgate: Your Pictures Are Next

    Chris Campbell

    by Chris Campbell
    On Sep 4, 2014

    Hundreds of pictures of nude celebrities were leaked onto the Internet last week. The mainstream is blaming twenty-something hackers, but according to Chris Campbell, everyone must’ve already forgotten what we learned about the NSA only a year ago. Read on…

  • Free Markets and Malaysian Fireflies

    Free Markets and Malaysian Fireflies

    Chris Campbell

    by Chris Campbell
    On Sep 3, 2014

    The fireflies along the tidal rivers of Malaysia show "feats of synchrony that occur spontaneously, almost as if nature has an eerie yearning for order." Chris Campbell tells you where else this might occur in the world. Also, new technology may revolutionize the agriculture industry and what we think of as a farm.

  • PainRelief

    The Natural Pain Relief Miracle

    Brad Lemley

    by Brad Lemley
    On Feb 4, 2015

    What’s the single biggest health problem in America? Note that I’m not asking about the most widespread disease. Instead, I’m inquiring about the specific health problem that the largest number of Americans would most dearly love to solve.

     

  • Smoking Pot in the Governor’s Mansion

    Smoking Pot in the Governor’s Mansion

    Chris Campbell

    by Chris Campbell
    On Sep 2, 2014

    Jeff Davis is running for Governor in Hawaii and has an interesting campaign strategy. Also, what motivates hackers is revealed and the findings might surprise you. Finally, Ferguson is discussed in a new light. Chris Campbell has more...

  • The End of Money

    The End of Money

    Bill Bonner

    by Bill Bonner
    On Aug 22, 2014

    When the government pumps trillions of dollars into the economy, they’re not actually printing the money. It enters as digital entries in banks across the country. It’s made the system fast, responsive, and, unfortunately, vulnerable. Now our money is no longer something we hold in our hands, but something that exists on a very susceptible network.

    An article in , ,

  • Time to Take the Plunge in Juniors

    Time to Take the Plunge in Juniors

    Doug French

    by Doug French
    On Aug 19, 2014

    When’s the best time to invest in something? When everyone else is trying to get their money out of it. It might go against conventional thinking, but following the crowd usually makes you miss the real opportunities. At one monetary metal conference recently, the smartest guys in the industry sat down to discuss where these real hidden gems lay.

  • The Moral Case for Self-Driving Cars

    The Moral Case for Self-Driving Cars

    Ronald Bailey

    by Ronald Bailey
    On Aug 18, 2014

    Say goodbye to your boring morning commute. New technologies are changing the way people drive their cars. It’s making them safer, more fuel efficient, and could reshape the way America builds its roads and cities. The only thing that could stand in the way...

  • Beef

    Beef: The Smart, Compassionate Choice

    Brad Lemley

    by Brad Lemley
    On Feb 1, 2015

    For the last few decades, virtually everyone seems to have agreed that eating beef is a bad idea: bad for the planet, bad for personal health, and bad morally. The problem? Beef haters are wrong on all counts. Beef can be a boon for the planet, extraordinarily healthful, and a highly moral choice.

     

  • Central Planning by Central Bankers

    Central Planning by Central Bankers

    Gary North

    by Gary North
    On Aug 15, 2014

    In a 2009 article, the Huffington Post went into considerable detail about the number of people with PhD degrees in economics employed by the Board of Governors of the Federal Reserve System. This is the government’s branch of the Federal Reserve. It is not one of the 12 regional Federal Reserve banks, all of which […]

  • The Only Email System the NSA Can’t Access

    The Only Email System the NSA Can’t Access

    Hollie Slade

    by Hollie Slade
    On Aug 11, 2014

    When the NSA surveillance news broke last year it sent shockwaves through CERN, the particle physics laboratory in Switzerland. Andy Yen, a PhD student, took to the Young at CERN Facebook group with a simple message: “I am very concerned about the privacy issue, and I was wondering what I could do about it.”There was […]

  • Don’t Ignore These 3 Big Sells

    Don’t Ignore These 3 Big Sells

    Greg Guenthner

    by Greg Guenthner
    On Aug 1, 2014

    Remember that correction we’ve been quietly talking about over the past couple of months?Well, it might be right around the corner. Stocks waited until the last day of the month to nose-dive. The S&P 500 posted its first 2% down day since April — and the Dow wasn’t far behind. Early this morning, futures continue […]

  • Why You’re Probably on an NSA Watchlist

    Why You’re Probably on an NSA Watchlist

    Mike Leahy

    by Mike Leahy
    On Jul 30, 2014

    I was talking with one of my colleagues the other day, and he raised a very interesting question, one that deserves consideration by anyone worried about their digital privacy. He read an article that championed the idea that the more steps one took to protect their privacy by using anonymous Web-browsing tools like Tor, the […]

    An article in ,

  • GMOProblem

    The Real GMO Problem

    Brad Lemley

    by Brad Lemley
    On Jan 20, 2015

    Pretty much everyone, I hope, has heard of genetically modified organisms, also called GMOs. And pretty much everyone, I hope, knows that they are now a major part of the American food supply. Most people, however, can’t say why this situation might be dangerous, beyond the idea that splicing genes from one species into another is “unnatural.”

     

  • Smart Apps vs. Obamacare

    Smart Apps vs. Obamacare

    Greg Beato

    by Greg Beato
    On Jul 23, 2014

    Health care costs in the U.S. have been rising so steadily for so long that containment barely seems possible. Even optimists don’t dream of cutting the price tag. As its official name — the Patient Protection and Affordable Care Act — suggests, Obamacare aims for affordability, not radical reduction.But at a time when we’re all […]

  • The Bitcoin Billion-Dollar Discount

    The Bitcoin Billion-Dollar Discount

    Dominic Frisby

    by Dominic Frisby
    On Jul 17, 2014

    When you type a website address into a browser, you might have noticed that the letters “http” appear at the front. “HTTP” stands for Hypertext Transfer Protocol. In typing a Web address, you are actually sending an HTTP command to transmit that website to you. Hypertext Transfer Protocol is the means by which information is […]