I had the opportunity to talk with professor, Per Bylund, about entrepreneurship, Austrian economics, cryptocurrency, and intellectual property on the podcast. Listen below.
00:00:00.000 Professor Per Bylund https://perbylund.com/
00:00:36.107 How did you become interested in entrepreneurship?
00:03:08.377 Theory vs practice of entrepreneurship
00:03:26.372 Mises: Human Action https://mises.org/library/human-action-0
00:04:28.346 Will understanding economics help us become better entrepreneurs?
00:04:46.894 Errors entrepreneurs make
00:04:59.100 Production process vs value process
00:08:15.300 Serving yourself by serving others
00:09:14.261 Creativity and imagination
00:09:53.810 Ideas vs implementation
00:09:57.590 Invention vs innovation
00:11:47.666 Value first, cost second
00:15:06.411 Entrepreneurship: Thinking about the economy in the right way
00:15:49.231 What projects get you excited about entrepreneurship?
00:16:11.760 Decentralization of technology
00:17:09.611 Social media
00:20:26.529 Future of content creation
00:21:28.986 Cryptocurrency
00:22:09.028 Ethereum https://ethereum.org/en/
00:22:13.817 Nano https://nano.org/
00:22:31.627 Micropayments
00:23:09.352 What hasn’t crypto had wider adoption?
00:23:33.028 Fiat currency
00:25:00.919 Security vs ease if use in cryptocurrency
00:26:07.982 Barriers to cryptocurrency
00:26:49.228 Responsibility in crypto
00:27:44.403 Over-engineering in crypto
00:28:41.022 Crypto has not become money
00:29:12.480 Intellectual property https://twitter.com/PerBylund/status/1386774810617958403
00:30:24.896 IP distorts the market
00:32:59.205 IP and big pharma
00:33:17.117 Nexium vs Prilosec https://www.healthline.com/health/gerd/nexium-vs-prilosec
00:36:03.192 Big pharma and vitamins
00:37:19.990 IP as monopoly privilege
00:37:35.537 IP is not benefiting the consumer
00:38:05.682 IP fosters inventions instead of innovations
00:39:55.611 IP and cancer drugs
00:41:48.707 IP is based on the assumption that the idea matters
00:42:25.540 Smartphones and IP
00:44:37.947 Copyright and creative works
00:47:03.336 Metallica and IP
00:47:33.959 Ways to make money other than royalties
00:49:33.249 Monopoly privileges coddle creatives
00:51:23.296 Getting rid of IP allows for different business models to flourish
00:53:35.363 Crypto and creative services
00:55:02.043 Where to go to learn more about entrepreneurship?
00:55:29.836 Mises.org https://mises.org/
00:55:52.440 Per Bylund on Twitter https://twitter.com/PerBylund
00:56:48.467 Economics in one lesson https://youtu.be/eyIfEpNfU2U
Automated Transcript
Professor Beland, I wanted to get you on the call today because I I become more and more fascinated with entrepreneurship and Austrian Economics and I follow you on Twitter and you you put out some great tweets and you recently put out an article or at least tweeted an article that had to do with something between the interplay of Austrian Economics and Entrepreneurship and I really just I want I reached out to you to see if if I could explore those topics more with you today and graciously accepted.
00:00:34
So, I just to start out with, I’d like to know what got you so interested in entrepreneurship Well that’s a great question actually. Um it it really is I mean for whoever is interested in Austrian Economics and who’s interested in the dynamics of the economy and how everything works. I mean where economic growth comes from where our well being and standard of living comes from how we produce wealth.
00:01:08
All of those things which are sort of very core to understanding the economy and and and figuring out where we’re at and where we might be heading. Um that is entrepreneurship and I mean NESIS talks about how entrepreneurship is the driving force of the market economy and that’s exactly right I mean the it requires a lot of other things too to have a a a good well functioning market economy but entrepreneurship is what what makes things happen it’s it’s the the change agent if you will or it’s really the it is the driving force And so you you were always interested in in that driving force and and do you were you an entrepreneur yourself? I sort of was.
00:01:57
I mean I I wasn’t always interested in the concept. So the concept of entrepreneurship in in in the realm of market theory that’s something that has become more and more interesting to me in in time. I mean I started out in in political philosophy really. Uh and then transitioned into economics and Austrian Economics. Uh and then into a theory of the firm and then into entrepreneurship.
00:02:22
Um as as far as my background I I started a business along with other students in high school that’s what that was my first the first time I was exposed to to sort of running a business and and doing that sort of thing and then straight after high school I started a business with a friend of mine and then I started a couple of other businesses as well one alone and one with my with my wife and they didn’t do very well well they didn’t do well at all but it it was sort of a it was a very interesting experience and it sort of it it made it clear to me that the the way we usually approach things and with the way we excuse me the the way we think about the world and the way we think that it will work when we start a business and so forth that it has very little to do with how it actually works and I I think that has to do with what what Mesis talks about in human action it says something to the fact that economics is the type of study that uncovers how things actually work and and shows us that it’s actually the other way around it’s not it’s not what we think it it works the other way around completely and that’s that’s the big power of economics that we can sort of uncover uncover that and entrepreneurship is is the same thing.
00:03:50
I mean it’s a it’s an important part of the economy and it works not at all what the way you would think it works when when you when you just sort of dive in and and and want to and try to start a business.
00:04:05
Yeah yeah. You I’ve had some of those same experiences where where you try to start something and you start putting things into practice and it doesn’t didn’t quite work out the way I thought it might. Um do you think that you talked a little bit about understanding economics versus practice? Uh do you think that understanding or having a deeper understanding of economics or specifically Austrian Economics can help someone put into practice become a better Entrepreneurship oh absolutely I mean that’s why I do it so many of the the the sort of errors the fundamental errors that many entrepreneurs commit and that that is the a reason for why they fail is that they they they approach it as a production process rather than as a value facilitation process and what I mean by that is that usually the way we think of entrepreneurs is that they want to produce something so they go about out what the cost are and how to produce it set up a production process they produce the goods and then there they are and sort of if you build it they will come and then usually they fail because they haven’t haven’t figured out the market haven’t really checked with consumers if they’re willing to pay for this sort of thing or exactly what it is consumers are looking for and I mean what Austrian Economics Theory shows very clearly and which is true too is that it value goes the other way around right so production obviously starts with digging a hole in the ground and and extracting iron or and then spelting it to get iron and then and produce something out of iron but value is in the using of a thing to satisfy your want so you are a consumer to begin with so you have to figure out how to how to use it and whatever is used to produce that thing that that satisfies your want has value Because it contributes to that experience you get when you’re using it.
00:06:21
So what an entrepreneur should do is not start with production and just think of something that they want to do but rather think okay how can I serve this customer segment or the these consumers? How can I how can I produce something that will really make them better off? Something that is of huge value to them in on their terms. Okay how can how can I do that? Uh and then from There when you’ve when you’ve sort of estimated that that very valuable contribution you can figure out what what price can be charged for it.
00:06:55
So the price must be much lower than the value or they wouldn’t buy it of course. Uh and when you have an estimated a price that you can charge then you can start thinking well okay so how am I actually going to go about producing this thing? And of course the question also should I produce this thing? I mean can I make a profit out of producing this thing that that facilitates this much value for the consumer.
00:07:19
So in instead of just assuming all these costs and so adding the cost together and then making up a price and then selling what you should be thinking is okay what what is the value I’m creating here what price can I charge so that the consumer thinks it is great deal and they they won’t just buy more of it and then my job as an entrepreneur is to figure out how to produce this at such low cost I can get a profit.
00:07:49
Uh even though the the price is sort of dependent on on the value that the consumer places in the product. So it it’s it’s really about thinking about it the exact other way around just like me’s mentioned.
00:08:02
Yeah so it’s more of the servant mentality what can I do to serve my fellow man and provide value to him that he otherwise can’t get in the marketplace. Yeah exactly right so so I mean in the marketplace what’s so beautiful with the market is that the best way of serving yourself is by serving others. Right so and and that’s what the what entrepreneurs do they try to figure out how to serve a certain subset of the population or the their customers to the best degree possible and if they do that well and are able to keep the cost low then they can they they basically get a cut right the profit so the more they serve the consumers the higher price can be charged for the product which means it’s easier to cover the cost which means you can you can get a higher profit out of it so there there no contradictions right so I I think that it’s really beautiful that we can be sort of self interested and because of the interactions and the specialization and how the market works we serve ourselves best by serving others to the best degree possible.
00:09:12
Is there a, it seems to me that there’s a lot of creativity and imagination that’s involved with entrepreneurship from reading biographies of great entrepreneurs. Is there a way, how do you see that creativity element interplaying with economics and and learning more about how to become a better entrepreneur? Well I mean you don’t have to be super creative. I mean usually we we think of entrepreneurs as innovations and as these sort of great thinkers or the doing something magnificent but you don’t actually have to do that to be a a good entrepreneur.
00:09:53
I mean it’s it’s entrepreneurship is not about the ideas. It’s about the implementation. So another way putting that is that it’s not about the invention it’s about the innovation. That is have taking an idea good or bad yours or someone else’s and then transforming it into a gooder service that can be of of value to consumers. So that that is that is the most important part of entrepreneurship and it’s also the hardest part.
00:10:18
And that’s really what what investors are looking for too when they’re investing in in entrepreneurs. They’re they’re looking that that checking out the the founder the entrepreneur and thinking hm can this guy actually make it happen? I mean they’re not buying the idea. They’re thinking okay can this guy with our help and with our money actually bring this about and make this a valuable experience for customers so that there are enough customers willing to pay enough of a price to cover the cost right so you you’re sort of right that economics itself doesn’t seem all that creative right so it’s not innovative and and I mean that that is true economics just Austrian Economics finds a place for the entrepreneur so it really the entrepreneurial function in the marketplace so so studies it analyzes it tries to find out what what entrepreneurs do is sort of a class if you will and and that’s I mean it what that class does is creative because they’re figuring out new ways of doing things and new things to do right but but that Economic theory that doesn’t necessarily help you with being creative.
00:11:40
On the other hand it it does help you with figuring out how to how to do it. Right? So how to think how to put value first and cost second for instance.
00:11:52
Okay. Yeah.
00:11:53
You mentioned invention versus innovation and innovation is the thing that’s really difficult to to do is is that I I don’t know if that’s true actually. I mean the the just having an idea. Lots of people have ideas. I’m sure we’ve all had ideas but putting something into practice, bringing it to market, all those things that go into a product or a service and making it Value for a customer.
00:12:24
Are are those the kind of things that you teach or are you more focused on the theory of Austrian Economics or do you do you also teach like actual hands on how do you innovation and and bring a product to market? Right so I I do mostly theory. A little now and then I teach more more hands-on courses but at at a low level sort of introduction level courses in college it’s more about trying to get the students to think about what a business actually does.
00:13:02
So so what what is the role of a a new business? What is the role of the entrepreneur in the economy and how do you think about all these things? So you have to put so many things together right? The financing is one thing but then you have the HR and you need to do bookkeeping and you need to keep track of contracts and all this stuff too.
00:13:20
So there there all these pieces need to be put together. So in a sense it’s teaching a business plan or or figuring out the business models so it’s it’s creative in the business model sense which which to me is it’s really the core I mean it’s what you mentioned there with innovation and how to make it valuable to someone right so the business model is how you do business it’s everything from how do you charge for something is it like a an upfront fee or is it an a fee after the factor is it a subscription those are very different types of services and how do you how do you figure out how to make this as valuable as possible for the customer out there right so so those things it’s I don’t really teach sort of imagination or ideation this type of inventions and things like that it’s usually what is done in in a like engineering colleges and things like that where where they actually develop products right but they they stay on the technology side where they figure out new types of devices or new cool features and and things like that but whether it actually has value I mean that that’s where I come in as an as an economist and especially Austrian economist and entrepreneurship scholar to to try to figure that out I mean how do you make this valuable to other people and what what what methods are there to use what what best Practices are there to figure that out.
00:14:58
Um things like that. Right? So but I I teach most mostly theory because it’s it’s a to me entrepreneurship is to a great extent it’s about thinking about entrepreneurship and the economy in the right way.
00:15:16
Yeah, yeah, I heard a conversation that you had with Hunter Hastings, that I was listening to this morning, where you, you were evaluating, the, the big tech model of industry, and where the, the person using the product, or using the service like Twitter say, is actually the product, and that there could be a lot of value in, and opportunity in, in a, a different service And you’re theorizing about that.
00:15:48
Do you do you have any things on the horizon that you see like that that really get you excited about entrepreneurship? I mean when you see things that your theory tells you there’s there’s a lot of untapped value here. Do you have anything that it especially excites you lately? Um yeah yeah I think so. I mean in terms of technology anything that is decentralizing so with the whole blockchain not necessarily Cryptocurrency I mean that’s interesting too but how that can be used and decentralized systems in in in general.
00:16:23
I mean I I was a systems developer in a previous life. Um and and the distributed systems and decentralized solutions I mean that’s I think that’s where we’re heading. Right so so what you You mentioned with the social networks and these kinds of services I mean they’re in it only to collect data on us. Right? So they’re they’re they want us to create the content and then they’re sort of studying us.
00:16:49
It’s like an experiment and then they’re selling ads to their to their real customers who really just want to get into our pocket books because they want to figure out how to sell their stuff to us as as cheaply as possible which is a I mean that’s a great service. Um But I I think social media will probably especially now when we’re talking about censoring and and things like that to it will probably move towards a much more decentralized model where there’s sort of it is no no bottle nick.
00:17:25
There’s there’s no controller to to censor speech or to follow you and and collect data on you but instead where where it could be I don’t know where where people say they tip you for content or or what have you. I mean all all of those different types of models instead where it’s about content creation. I think very often entrepreneurs and and others when there’s a hype herd mentality so they they move in one direction and it seems to work and then everybody’s going that direction so the internet has become that way basically thanks to Google right so everything on on the web is supposed to be free which means we are the products and then everybody is launching free stuff and they’re all trying to get to be the biggest one in any sector because then they can start to really cash in on the data they’ve collected at least so they think right I I think this this is in general a pretty poor model and I think the problem for Silicon Valley and and other tech innovators is that they haven’t really considered the entrepreneurship aspect of it right so they’re they’re stuck in in the engineering part of of developing products but they haven’t really thought about how to create value and how this is valuable to the user or sometimes even who is the user they don’t even know that sometimes and so that’s where I see the the the great space for a newcomer or an opportunity to start something new to actually think about the value of the interaction itself right because now they’re using interaction as a means to get more data but I think the interaction and how people learn from each other and and inform each other and help each other there’s a lot of value in that and I think people are getting more and more used to paying a cent here and ascent there for these little services right so where you have people basically tipping other people for writing great content, right? You can do that in small scales so you can produce beautiful tweets say or or short articles and people can tip you for it and that could be a very decentralized type of economy where you don’t really have to steer the content because it’s not a shouting match.
00:20:01
It’s not about who gets to the F word first. It’s not about who can who gets to call the other guy Hitler, right? Like very often the discussions online with the usually up there unless they start there. Right? Whereas I think a lot of people are interested in quality content and we’ve sort of ended up with a lot of **** content. So there’s that means that there’s an opening and an opportunity to to create a different type of platform where people can create good content for each other and and where good content is rewarded.
00:20:34
So again I mean a a sort of marketplace where we serve ourselves by serving others and not this other sort of central situation, a centralized system where the owner of the system gets all the benefits and gets to decide how we’re interact.
00:20:50
Yeah yeah I think you’re right there and I and I think I’m on a social network called Twitch which runs on the BSV Bitcoin blockchain and basically to it’s very similar to Twitter but to if you like something there it’s it’s five cents I think if you post something it’s two cents you can have you can you can do this thing where if people are trolling you you can have them that where it’s required that they pay a toll to be able to troll you so it it’s really interesting that network and and I I I feel like things like cryptocurrency where you can make small transactions like a penny or 5 cents like say you could pay a few cents to do a search on the internet and not be tracked and traced like you do with Google could be very Interesting and I I feel like cryptocurrency could potentially open that door although the onboarding into crypto at this point is still somewhat difficult.
00:21:55
Yeah and you also have the cost and the latency and everything like that in many cryptocurrency so they’re they’re not I mean some of them are are better for these types of of microtransactions than others but so I think Ethereum is trying to to become that type of cryptocurrency and Nano is developed to handle very small very fast transactions. So so there are such alternatives but there’s no there’s no standard yet and of course there’s no a lot of people like you said a lot of people are not even using cryptocurrency at all.
00:22:30
So so that might be a problem. And this is this actually pretty fascinating because I I wrote a a master’s thesis back in ninety-nine. Uh in informatics before I started my assistance development career that was on micropayment systems on the internet. Uh and and trying to figure out how what would be required from such a system in order to for it to to work well and and be adopted by by people buyers and sellers on the internet and it’s it’s funny how I I wrote that thesis in back in 909 and now 22 years later we’re still struggling with figuring out how to do microtransactions in a good way.
00:23:15
Yeah. Yeah. Why do you think that is? Yeah I wish I knew because then I would probably produce a solution to take over the world but yeah I’m not sure I mean it’s very I mean it’s part of it the problem is Fiat currency that they’re simply not not very good at this they’re they work well as cash but online cash is not very useful and then you have payment services from credit cards to PayPal and things like that and they’re also I mean It’s a hassle, right? It’s it’s much easier now than it was 20 years ago of course.
00:23:55
But it’s still it it’s way too costly per transaction in both time and in money wise and everything like that and it’s it’s in a sense too centralized too. Uh so I I think I mean some type of cryptocurrency like some sort of decentralized system would be much better at it but I think I I and I’ve talked to some of the cryptocurre about this before that they have the they have the invention and they have the technology they’ve done really well there but they haven’t done they haven’t done really well with the innovation right so they haven’t made it clear how it’s useful and valuable to the the broader audience so the population at large right so most people have no clue how to use Bitcoin and might not benefit a whole lot from using it either and yeah there are some traders who use Bitcoin and you can buy Teslas with Bitcoin right but I what they should do is instead of instead of focusing almost I would say completely on things like anonymity and encryption and and security and that sort of thing a a good entrepreneur would find a balance right so they would find what what the consumer values and then from there what would sort of find a hopefully a right mix between all those different values so that it’s easy to use So that consumers see real value in actually just trying to right? Whereas if if it’s cost if every transaction is costly and and it’s hard to do it takes time, it takes a lot of electric power and what not else.
00:25:51
All of these things those are going to be obstacles. Right? So those are going to be barriers to entry for a lot of people. Uh whereas those what you need in order to get a new type of service like this to get it adopted by a lot of people you need to lower those barriers as much as possible and that might might mean lower security it might mean a system that is not quite as reliable I don’t know but technology wise perhaps a faster transaction even though some transactions disappear or wrong might be of of greater value to consumers in general than a transaction that takes time but it’s super secure see what I’m saying Yeah, yeah, I think you’re right on that.
00:26:42
And I think part of the problem, at least when I first cryptocurrency is, you’re kind of, there’s a lot more responsibility on the consumer, and I think, consumers, don’t always want that much responsibility with controlling their funds. I mean, if I lose my password to my bank, I can drive down the road to my bank, show my ID and get them to reset my password.
00:27:05
If I lose my crypto password, my funds might just be totally lost.
00:27:11
Right and and I mean that’s that’s a good reason to not have all your funds in in in cryptocurrency if it’s on one account right because that then you’re totally screwed and I mean I’m not saying that the that it should be insured by the government or anything like that but I mean the the role of the entrepreneurs really to it is the innovation is bringing value to the consumer right so and and then you have to figure out what the consumer actually wants when you have tech enthusiasts producing a solution you or engineers you you typically get a a a really great solution but the question is for whom right so is it actually of value the way it is produced well it might might be really well produced the technology might be awesome the the encryption might be just magnificent the system might have no flaws whatever although any of those things but then it turns out that no consumers don’t actually care that much about that that they don’t care if they they lose a transaction here and there but but they can do it very easily or it’s just one push on a button or something and then and then it’s done and there’s no wait times I have no clue personally what people want out of a a payment system like this but there’s I would say even though cryptocurrency have been super successful they have not become moneys right even online and and there’s a reason for that and I I I would think that it is because there’s a lack of innovation there’s it’s great technological solutions but but rather poor at least yet so far right right pretty poor entrepreneurship yeah yeah I think you’re right on that you you the other day you had a a tweet storm I believe is what they call it or a threaded a threat on Twitter about intellectual property and I was very interested in that because I’ve I’ve been learning more about intellectual property and the pros and cons and things like that and I I wanted to know if we could touch a bit on that because I I thought what you said was very concise and very understandable.
00:29:43
Um can you explain I’m trying to think of a place to start like for example what I I if I watch the show Shark Tank there’s a bunch of venture capitalists ready with money to spend on these entrepreneurs and often times one of the the first things they ask is do you have a patent on your idea or invention and but on the other hand there’s people like yourself who don’t think that intellectual property should be protected by a government authority.
00:30:17
Can you explain the interplay between intellectual property and entrepreneurship might work? Sure, I mean, my argument is really a matter of of economics, right? So, so I think that patent in all these intellectual property rights so called really distorts the economy and and that’s that means that consumers suffer and will suffer for for a long time because the wrong things are being produced.
00:30:47
So, scarce resource is put into producing things that we don’t really like as much and don’t really want as much as we otherwise would have gotten okay so that’s that’s my starting point typical economist starting point there are several arguments you can make pro work on intellectual property and very often it it goes into ethics right do you have a right to what you create and and things like that I mean those are interesting questions too but that’s not really where where I address these things so first of all when when I advise an entrepreneur I too would tell them to go for something that is protectable right get a patent if you can and if you have a patent well I mean then you’re safe because noone has a right to copy what you did that doesn’t in itself mean that the system is very good right of course you should go for for whatever is to your personal benefit right but it doesn’t mean that the system itself is is particularly good.
00:31:53
Um so the the problem with patents is well there’s several problems with patents but but one is that by patenting things and of course you you can’t patent everything right? So so by saying that certain things can be patented and others cannot you’re already steering investments away from things that cannot be patented towards what can be patented and this is obvious right because if you if you have an idea and you don’t really know if if if you can make money off of it but it’s patentable well then you get a little more time and you don’t have to figure out how to make money off it and it’s better to invest there because then you can just get a patent and then it’s yours and it’s you can uphold that that monopoly which is what it is whereas if you Invest somewhere else then you need to figure out how to monetize the idea you need to keep it quiet keep it safe keep it secret right because if otherwise someone else can copy you so what this means is that a lot of research and development will go into anything that is patentable and we see this a lot in in in big pharma so here you you have I mean as soon as a a patent is about to expire they tend to invent a new version of the drug where they where they sort of they change the active substance a little bit so it has basically the same effect but it’s not exactly the same which means they and this as they own the patent of the original stuff they can be close enough to get a new patent so they’re they’re not they know how to not violate the the previous patent right so so you have I can’t recall the the name of the the company but the the the drug Nexium for instance.
00:33:53
Uh that there was a previous drug which I also forget the name of which did exactly the same thing but it was sort of the previous generation. They had a patent of that and as as that patent was about to expire, they invented Nexium instead which is slightly different in order basically to extend the patent to keep others out.
00:34:15
And this just means you get a lot of investments into this pretty from from a consumer’s perspective is pretty worthless stuff right so this new drug is not necessarily a lot better than the previous one so what you’ve you’ve created is first the first drug you have a monopoly and you can sort of maximize your profits noone else can do anything at all until that that patent expires they can look at what you’re doing but they can’t copy it and then you extend it by investing in specific research intend intended only to extend that patent.
00:34:53
As you can you can get more monopoly profits. Now it’s not clear why the consumer would be better off by getting a second generation of this drug instead of getting some other drug. Right? So so it it distorts where these investments are being made and we can see in big pharma people are are usually mentioning as an argument for patents that it’s so expensive to develop a new drug.
00:35:17
Yeah it is so expensive to develop a new drug but that is with a patent right there are plenty of low hanging fruits that might not be patentable that are not being pursued at all because you can’t get a patent right so the patent itself increases the cost of developing the drugs which is again economics it it it seems to be the other way around right it thinks that logically should be the other way around but it turns out it’s this is this is the way it is right so one one side effect of this is I’m not sure if you’ve heard but there have been several campaigns by businesses in the in the pharma industry have lobbied congress to either outlaw or or make a vitamins prescription based now most people go well why would you need why would you want to make vitamins prescription based well it it’s a matter of protecting their profits right if if you need to go and see a doctor get to get a prescription to get vitamins C, right? So it’s not over the counter anymore.
00:36:36
Well then the doctor might as well write a prescription for a real drug so to speak. Right? So they’re raising the cost of using vitamins. Which really makes people less healthy because they will be deficient in all kinds of vitamins that otherwise they would have gotten easily in Walmart wherever. Right? So there’s another distortion that happens because of this system.
00:37:00
Uh so I mean there are many of these things that are just so getting at it from from my entrepreneurship perspective where the whole point of any production is to create value for consumers and as we start out talking about how you serve yourself by serving others well if there is a a monopoly privilege that you can get your hands on if you’re the first one and then you can exclude everybody else and you can just maximize profits you’re not really benefiting the consumer to benefit yourself.
00:37:39
Right this is at the consumer’s expense.
00:37:42
So I mean another distortion is is of course a patent is for the first one. Right so whoever is first to apply for a patent on a new idea whether it’s a new drug or whatever they get the patent and then noone else can can do anything about that. They can’t they can’t copy the idea. They can’t be close enough because then they can be taken to court and everything. Which means you you get a whole lot more investments into innovations or inventions than you otherwise would. Why? Well because if you can secure these patents you also at the same time make sure that no competitor can get into that space.
00:38:24
Right? Yeah. Which means it’s suddenly it’s so much more lucrative to just push a lot of millions into your R and D budget and try to figure out all crazy kinds of ideas and get patents for those ideas because whether or not you’re going to use them whether or not you think there’s a product there well maybe there is right so just a chance that there might be you get a monopoly and it could be the case that your competitors are thinking of going in this direction and they might be able to think of a new fancy device or a new drug or whatever for consumers then It’s better for you, isn’t it? To invest millions in this, get a patent so they can’t get there first.
00:39:13
Well, this is definitely not in consumer’s interest. Right, this is just about killing ideas and and and making sure that the competition doesn’t doesn’t get to serve consumers. So that there there’s so many things with with this system that and we haven’t even talked about whether ideas at all should be property and things like that, right? But but just the the distortions caused by the system is just a It’s immensely costly.
00:39:41
I where would we be if if businesses could not seek these monopoly which are handed out by the government right? Yeah. Well we would have solved a lot of other other things. We would probably have instead of going to use one example instead of having really really expensive attempts at treatments for cancer that using all these patented what have you right? Uh lots of of chemistry involved here and lots of R and D I mean there there are some people are arguing more or less persuasively I mean depending on who it is and so forth that you can do with changing that your diet using certain I don’t know I’m not an expert but vitamins or hormones and stuff like that which are cheap over the counter and and not patented you can use these things perhaps as effectively but are they used no they’re not why well because you want a patented drug and of course those patented drugs are pushed out and then you have the whole insurance system in in this country where where well the patient doesn’t actually pay it anyway right the the insurance Company does and so everything is just totally screwed up.
00:41:01
Yeah. Yeah. There’s many distortions along the way and I mean getting to the doctor patient relationship that’s a a whole another distortion where where things are steered in a particular direction. But it it sounds like that you you’re kind of you’re making the argument that a lot of funds and energy and resources are steered in a particular direction towards invention rather than innovation which you had distinguished earlier.
00:41:26
Innovation is you know making the actual practical product and getting first to the it perhaps whereas invention all this with patents it’s it’s steered mostly towards ideas and and protecting right because the system is yeah the system is based on on the on the the the false assumption that the idea matters whereas whoever knows anything about entrepreneurship as we talked about before they know that the idea doesn’t matter all that much it’s about the implementation it’s about whether you can make the idea into a gooder service or an experience for consumers that consumers really value because then you have a chance of covering your cost and and earning a profit right but patents patents are not for using for for implementing it in a certain certain way therefore the idea right so smartphones is a good example where every little thing in your smartphone is patented by some company and they’re all paying each other for this stuff right so Apple is really good at at a pad patenting stuff and then taking everybody to court, right? So they have have had this policy since basically forever.
00:42:42
Uh so competitors of the first iPhone they needed to try to innovation around the iPhone’s patents. Which is takes a lot of effort. It takes a lot of capital and it’s it’s really hard of course. I mean you’re you’re you’re kept at a disadvantage by the patent which is sort of the the point of the patent, right? Uh but inventing around something instead of using the idea is is super expensive.
00:43:14
Uh and the same thing I mean Android it’s a it’s a free operating system. Uh well it’s still based off of a number of of inventions by Microsoft among other companies. Right so so they pay a royalty fee to Microsoft in order to offer Android for free which of course is an additional cost but they they need to use these ideas and I mean if you and go into any software and go to the about page you’ll see a list of different patents used in that software Well I mean as a user you you don’t give a damn right you’re using that software because it looks and feels in a certain way it provides you with certain service right this it’s your user experience whether that’s built on a certain idea or not doesn’t really matter so the the the problem is with this distortion of course is that there’s a lot of money to be made with just having an idea first Yeah.
00:44:22
But the the idea might never materialize. Then my idea might never be used in a product that benefits consumers. Now that can’t be the purpose of of patents.
00:44:35
Right.
00:44:40
You know you’re you’re sort of a in in a way I would think like an entrepreneur of ideas perhaps I I don’t know if if that’s correct but like when you write a book or produce something like that that has a copyright marked on the first page do do you think about through these ideas about intellectual property and and how does it change your practice if you’re if you were to market an idea or or something like that like a book or does it at all? Well well it it doesn’t to some extent because when I publish books like the books I have published they’re published by a publisher and they maintain the copyright right so it’s I think it’s formally mine but it’s something weird so I I own the copyright of the book but they own the right to copy the book so something something weird so I don’t actually have a right to the content until they release it right so just in order to get published I’d have to disagree with all this stuff.
00:45:44
Uh so in that sense it it doesn’t really matter all that much. Um had I had I had the chance and I mean I I will publish a book with a Messus Institute that will come out this fall sometime.
00:45:59
And they do not claim copyrights right so that I I don’t know how they’re going to going to publish it we haven’t discussed it but I’m I’m guessing that they will say published by the institute or something and then it will say please use this in sort of a an honorable way or something you may copy and use the contents but we ask you not to not to take the whole book and copy it and sell it for yourself right I think they’re probably going to is pretty much at cost anyway but but I mean they’re they’re going to probably post a PDF on the website and all this stuff and that that that it I I it doesn’t bother me and it’s actually the other way around because I write this stuff to get the ideas out there so I want people to read this stuff so if a book is offered for free then I think that is awesome and I think they’re for many of these these sort of creative acts people have because of the copyright and patent systems they have just assumed that they are there which of course is true so they haven’t really thought this through much right so so that’s why people get really upset like I think it was a Metallica drummer Lars Olrick got really really upset when when people started sharing music files online because the get royalties anymore.
00:47:33
Um so so they’re dependent on royalties but you have other artists who have discovered that well you have the big gatekeepers in music, the labels, the the record labels. If you don’t get a contract with them you basically shut out. Right? Until YouTube. So you have a bunch of artists who started posting their music on YouTube and some of them just took off because people like the content. Well they don’t really get paid a whole lot for that or maybe maybe they can’t through ads or whatever but but not as much as as releasing a record or two in having a global marketing campaign but turns out that they can make a lot of money by by offering live gigs.
00:48:15
So they put on concerts where people might even crowd fund to put on the concert and then they buy merchandise and swag and all this other stuff. And there’s money in that but not in the music. So it could very well be that many of these things are not actual the actual products in themselves. I mean that they are what you want to do and they are what you are good at doing but not the source of income.
00:48:42
They’re means to the source of income. So in in in my own case if I would write a lot of content for free which I do on Twitter like you mentioned. I also like articles at the Measis Institute and and things like that they’re totally free. I don’t get paid for that at all. Um but what it does lead to is say I get invited to be on podcasts.
00:49:04
Um I get to work on my brand quote unquote. Um I might get invitations to do speeches for live audience and people might want to do Q and As and they might might want to pay for it. Right so there there are other ways of making money and these are these are different business models right? The different ways of of getting paid for what you’re offering. And the problem with many of these creative industries is that because of the patent and copyright systems which are just monopoly privileges handed to you by the state because of these they have simply not bothered with that part of entrepreneurship and that’s the most important part of entrepreneurship how to figure out to how to produce as much value as possible of consumers and getting a cut right so making it worth your own while but is not been part of instead they live in the the fantasy that that oh if you they just produce nice music and it’s played on the radio then you have this whole apparatus of of music labels and radio networks and the state and everybody and they’re paying royalties.
00:50:17
Well that just means that you’re producing the music but you’re not thinking about how to actually make that music valuable to others and to yourself. So you’re not serving others and thereby serving yourself. You’re just producing the music for yourself and then you demand to get rich because you produce music. I mean that’s not how the world works and that’s really that’s selfish. Um and I I think it’s a I think it’s a little bit repugnant actually.
00:50:48
Right.
00:50:50
Yeah yeah I mean as you were talking there I I I got a little bit inspired. I I have published a self published a couple of books and and maybe I couldn’t make more money just by putting them on my website and and monetizing it some other way than collecting you know $50 check from royalties on Amazon or something like that. So that’s that’s very interesting. Makes me think.
00:51:17
Um. And that that’s what Entrepreneurship is about, right? Figuring out being creating in that sense. So I we talked about well that’s like 45 minutes ago or something that it it it these are different services if you’re selling selling it with a a price tag and you it’s a one pay once and and then it’s yours a thing or if it’s a subscription service. Right? So we basically now the whole society has moved from buying CDs to instead using a streaming service.
00:51:49
Those are not the same the same types of products those are different ways of satisfying consumers and different simply because they’re they’re not only different ways of delivering it because it’s music but it’s also different ways of getting paid for it right so maybe it’s more valuable to you that do not go to the record store flip through the CDs and buy one that you have listened to once for outrageous amount of money you have that at home and you can you can play it whenever you like and most people with CDs know that they have a few CDs that they never play right so they they paid those 1520 bucks or whatever for for the CDs and yeah the the producer of the music got paid or the record label got paid but there was no value in it for US consumer or and then the other version would be something like Spotify where you pay a monthly fee and you listen to exactly what you feel like that day and you discover new music right and those the artists get paid instead so you so it’s it’s much more tailored to and you actually pay for what you listen to right so it’s it’s a it’s a better system in in a sense in in that way right that that the listener pays for the chance to listen to all this great music and they can discover all this other music that they would never have discovered otherwise and the artists get get paid a little bit because you actually listen to them so there there you have Connection, right? It’s it’s a much clearer connection between the user and who has a valuable experience and therefore, money goes to the producer.
00:53:35
Yeah. I I I can see that. I in I wonder if there’s a way to get even closer from consumer to the creative producer. You know Spotify is in the middle taking a cut but perhaps with more of the the decentralized services and maybe if Cryptocurrency becomes better you could put out your music or a book on a on a blockchain and every time it’s downloaded a few cents goes into your your crypto wallet or something like that.
00:54:08
Or maybe. Oh absolutely.
00:54:10
Yeah. Yeah absolutely and I mean Spotify you they’re still playing the old game right? Cuz they have a contract with the record labels who have contractual monopoly with their artists so so they’re still playing that game but you can have a a separate system where new artists who have no way of getting a contract with a label they put their music out there and if you if you play it you can either tip them or you just pay for play right a centre too or whatever right so you can you can create this separate system on the side that might work similarly right but could be cheaper or could be completely voluntary I don’t know that would give other artists a chance Right, right.
00:55:05
Professor I really appreciate you coming on the call with me today. If people are if I’m well I specifically am interested in learning more about Austrian Economics and Entrepreneurship and hopefully some people on the call as well or the people listening to this later on. Um to explore those interests more and to learn more about this way of thinking.
00:55:30
Well the measles institute website would probably the first place to look which is mesis.org M I S E S dot org it’s the world’s largest website with Economics Content it it can be a little difficult to figure out where to start because there is so much materials but but but there are some introductory articles there too I would think that my forthcoming book in the fall which is tentatively titled Austrian Economics a Primmer should it it’s intended to be a crash course and sort of easy easily digestible introduction to Austrian Economics and it it it will be sold by the Mises Institute for just a few dollars probably put on their website and everything like that too.
00:56:26
Um that there are other introductions to Olson Economics too but they’re usually more expensive and longer probably but it’s more difficult to read. At least the the point of my writing this one is to make it ease to understand to the point it should be much in line with Henry Hass Economics in one lesson which sort of a standard introbook to understanding economics but this should be mine mine will be about half the length. And will cover Austrian Economics specifically and not sort of economic way of thinking as in in Haslet.
00:57:06
Well that’s that’s excellent. Yeah. Um I I did read Haslet’s book and he focuses a lot in that book about trade offs. If you do things one way then you don’t you can’t do it the other way but don’t think he’s mentions much about entrepreneurship in there. I’d have to reread it but I’m I’m excited to to read your book when it comes out in the meantime. I’ll put a link to your Twitter account so people can follow you there but I want to just thank you again for taking the time out of your day to come and talk with me on this call.
00:57:37
Absolutely, it was fun.
Aaron Olson 