Dilbert Explains Why Just Copying Others Is A Dumb Business Model
from the the-wisdom-of-dilbert dept
One of the common claims that is brought up by patent system defenders when we discuss the idea of a greatly limited or eliminated patent system is that it doesn’t make sense for anyone to innovate, because others will just copy them. Of course, historically we have plenty of evidence that this isn’t true — and it makes sense if you think about it logically. Just copying something doesn’t give anyone a reason to buy from you — and depending on the product, copying them will take time, combined with the additional time to even let people know you’ve got a product in the market. By that time, the real innovator may be much further ahead. Steven points out that a recent Dilbert cartoon makes this point perfectly:
Comments on “Dilbert Explains Why Just Copying Others Is A Dumb Business Model”
Internet Explorer
Sounds like the business model for Internet Explorer.
I agree
I see it all the time.. Joe opens a pizza joint, Bill see’s him doing good so opens up another one. Next thing you know there are 10 pizza joints. Five years later they all go out of business do to competition.
Re: I agree
“I see it all the time.. Joe opens a pizza joint, Bill see’s him doing good so opens up another one. Next thing you know there are 10 pizza joints. Five years later they all go out of business do to competition.”
I see the absolute opposite regarding pizza joints on a year by year basis.
On the other hand, I live in Chicago, where we do pizza right and eat it all the time….
Re: I agree
“I see it all the time.. Joe opens a pizza joint, Bill see’s him doing good so opens up another one. Next thing you know there are 10 pizza joints. Five years later they all go out of business do to competition.”
No, five years later you have a Pizza District.
strawman
The reason to buy from me is that I copied somebody else’s product and offered it at a much lower price. Pharmaceutical knock-off manufacturers don’t have any problem getting the word out about their product.
Re: strawman
And nobody will ever buy from a name they know. That’s why ads don’t exist.
Re: Re: strawman
Some companies’ names are famous enough that people will know to choose them over knockoffs. More obscure companies will not hold this advantage. This is particularly true for inventions that (a) are low-tech or (b) don’t have several ways by which you measure their quality. For example, if the hammer were invented today, it could be knocked off by anyone who could stamp metal in the same shape. All the R&D cost that went into discovering the optimal shape for a hammerhead will be borne by the inventor, while others can knock the shape off easily. The quality of ordinary, handheld hammers does not vary much, as long as the head stays on the handle.
Re: Re: Re: strawman
So any company afterwards would have to make a sub-optimal hammer?
Re: Re: Re: strawman
All the R&D cost that went into discovering the optimal shape for a hammerhead will be borne by the inventor, while others can knock the shape off easily. The quality of ordinary, handheld hammers does not vary much, as long as the head stays on the handle.
precisely! explains why craftsman doesn’t make hammers. due the the high availability of cheap knockoffs.
Re: Re: Re: strawman
I could talk about establishing a connection with your customers and all that, or I could ask if you know what a Snuggie is. It isn’t a brand name people know, and plenty of others have made imitation products, but they still do plenty of business.
Re: strawman
Yes, it’s a good thing that America believes in killing off market competition!
Wait, capitalism? What’s that?
GET OUT!1! lol
Scott Adams must have spies in our offices.
I read Dilbert, XKCD (Randall’s spies work next door to Scott’s), The Zombie Hunters, and a couple World of Warcraft-related strips. I get all my news from Techdirt, Fark, and WoWInsider. This is why print media is doomed.
Re: GET OUT!1! lol
I knew a lot of major media outlets were doomed when I realized I was getting my news from South Park. If newspapers can’t keep up with South Park, I don’t think they deserve to exist.
Re: Re: GET OUT!1! lol
To be fair, I doubt Obama/McCain ran for president so they could steal the hope diamond together. 😛
I wouldn’t go looking to dilbert for enlightenment here:
http://www.dilbert.com/2009-11-17/
Rudyard Kipling said it in 1896
From “The Mary Gloster”
Speed to market is only 1 consideration
Many companies have been very successful by being ‘fast followers.’ However, most highly successful companies that I can think of don’t follow this model. Microsoft is the only example, and they’re more of a ‘slow follower.’
Speed-to-market doesn’t resolve all of the issues of the little guy. For example, if I come up with a really clever twist on search, I still have to develop it, build a brand, attract users, etc. Once Google sees what I’m up to, nothing would stop them from reverse engineering my development and adding it to their already well-developed ecosystem and destroying my market opportunity.
I’m not saying that the existing patent system is the answer, because I don’t think it is, but something is needed IMHO.
Re: Speed to market is only 1 consideration
When you have a good search model, you need to figure out its place in the market. That may require _you_ to identify its place in Google’s ecosystem, and then persuade Google of its value to them (ie – selling out is still selling).
If you don’t think you can make money by selling it to Google, then you will have to find another way to make money. You are absolutely right that Google’s hardfought market position will not be yours overnight, just because you came up with a new search model. (Should it?!) So you will have to find a way to make your money on your search in a way that does not depend on Google-supremacy. Instead of selling eyes and search result placement, maybe your new twist will allow you to sell something else. In other words, what is needed isn’t a government mandate or a socially-enforced monopoly. It is innovation.
Re: Re: Speed to market is only 1 consideration
Naah, you’d just have to give away a free T-shirt to everyone who used your new search. I’m at a loss at what to suggest, though, if Google gave away a T-shirt AND a pair of socks, though . . .
Another lovely from Mike
Logically speaking Michael, if you invest time/money into inventing something, there was an expense. Whether that be the expense of time, money or other would need to be quantified.
Now, if I come along and COPY the end result, one would believe I could sell this cheaper….hence someone wanting to buy/purchase/lease this from me since I did not invest the original time/money.
Think of generic drugs. Why are they “cheaper”? Why do people flock to a generic drug when it comes out? Because it’s less expensive and offered as such since the original design/development didn’t cost them the time/money thereby allowing them to offer it to the public at a far reduced rate.
Same as some Asshole selling copies of copyrighted movies/CD’s at Times Square in NYC. No investment, just burn and turn…..
Re: Another lovely from Mike
“Same as some Asshole selling copies of copyrighted movies/CD’s at Times Square in NYC. No investment, just burn and turn…..”
They do have to invest money, or do you think those little plastic discs are produced by magic?(Not defending the practice mind you)
Re: Re: Another lovely from Mike
Yes, but it’s $.25 compared to the money to pay for the band, recording studio time, advertising, etc….
Re: Another lovely from Mike
Think of generic drugs. Why are they “cheaper”? Why do people flock to a generic drug when it comes out? Because it’s less expensive and offered as such since the original design/development didn’t cost them the time/money thereby allowing them to offer it to the public at a far reduced rate.
Indeed. And yet, the originals — despite being nearly identical, still sell (and sell well) at much higher prices. If it were a problem, they wouldn’t still be able to sell at higher prices. What this shows is that brand recognition and being first to market matters, and you get a premium for it. Why do you need additional protection?
Re: Re: Another lovely from Mike
That’s the way it currently works with patent protection. They have the temporary monopoly to build that brand recognition by being the sole provider. Without the protection, a product would come to market with many “me-too” products following very shortly thereafter, and being first to market wouldn’t mean nearly as much.
Re: Re: Re: Another lovely from Mike
Brand recognition is much more complicated than that. If Bayer comes out with a new drug, even without patent protection, it has an advantage over no-name competitors. Whether its a good idea or not, people trust Bayer because it has been making pharmaceuticals for a long time and has managed to sweep any bad PR coming from its failures, misdeeds, etc under the rug. The reputation of Aspirin alone gives it a leg up among consumers for whatever the next drug will be.
Re: Re: Re:2 Another lovely from Mike
And how did it get there? Patent protection.
Re: Re: Re:3 Another lovely from Mike
[Citation Needed]
Re: Re: Re:4 Another lovely from Mike
This is an internet exchange, not a thesis paper. If you disagree, state why.
Re: Re: Re:5 Another lovely from Mike
Other AC did state why, no proof to back up statement.
What did you think [Citation Needed] meant?
Re: Re: Re:6 Another lovely from Mike
Prove it wrong with intellectual discourse. Don’t resort to two word comments that add nothing.
Re: Re: Re:7 Another lovely from Mike
The Earth is going to explode in three days. I will provide no evidence to support this claim, and you may not question my lack of evidence. Prove me wrong with intellectual discourse.
Re: Re: Re:8 Another lovely from Mike
I’m not asking anyone to try to prove something in the future or to prove something doesn’t exist. What I was referring to was a 1900 patent on Aspirin. That’s easy to verify, and the [Citation Needed] commend was a weak attempt to discredit the argument without adding anything of importance to the conversation.
Re: Re: Re:7 Another lovely from Mike
Prove your statement correct with facts and logic. Don’t resort to unsupported claims that add nothing.
Re: Re: Re:8 Another lovely from Mike
You sure are a persistent troll, I’ll give you that. Anyone with an interest in Bayer’s Aspirin patent or whether it existed could look it up. As I said before, this isn’t a thesis paper, and it isn’t necessary to cite every thought.
Re: Re: Re:6 Another lovely from Mike
And just because I’m a nice guy:
From http://inventors.about.com/library/inventors/blaspirin.htm
In 1899, a German chemist named Felix Hoffmann, who worked for a German company called Bayer, rediscovered Gerhardt’s formula. Felix Hoffmann made some of the formula and gave it to his father who was suffering from the pain of arthritis. With good results, Felix Hoffmann then convinced Bayer to market the new wonder drug. Aspirin was patented on February 27, 1900.
Re: Re: Another lovely from Mike
Unfortunately, Mike, while I’d love to agree with you that’s far from a fair comparison. Because most people who aren’t buying generics don’t care about the price because they aren’t paying it. If my employer provides my health insurance, and my health insurance is paying for my medication, why would I care if I can save a bit of money by buying a generic? But if I’m buying, say, a graphics card for my computer, I’m extremely concerned about the price. That’s actually the number one factor for me when buying a graphics card (because I don’t do much gaming) – I don’t care what brand it is, I don’t care what the specs are, all I care about is if it will work in my PC and if it’s cheap. I don’t even care about the warranty, because when you get down to a $20 piece of hardware, if it works for the 30 day return period then it doesn’t really matter anymore.
Re: Re: Re: Another lovely from Mike
In which case you should have just bought a motherboard with integrated graphics in the first place.
Re: Re: Another lovely from Mike
What’s interesting about this and why I used this analogy is that I was driving this morning and there was an ad on the local Chicago radio station WBBM from Pfizer (the makers of Lipitor and also a client of mine). The entire ad was asking users of Lipitor why they would want to buy a generic when their doctor prescribed “Lipitor”. It talked about using a generic and why they should stick with their “branded” product.
Do you think a company would go to that extent to put an ad out if they weren’t losing market share? I don’t…. Note this article from the NY Times about losing market share to generics. http://www.nytimes.com/2007/11/03/business/03generic.html
Re: Re: Re: Another lovely from Mike
Do you think a company would go to that extent to put an ad out if they weren’t losing market share?
Wait, are you honestly suggesting that companies that don’t have generic competition don’t do advertising? I think you’d find that you’re sadly mistaken.
And of course they’re losing market share. They started with 100%. There’s only one way to go.
But that does nothing to support the argument for the need of a patent. Why should they get a monopoly. The fact that they need to advertise and convince people why their product is better is part of basic business. I’m not clear what you have against that?
I could open up a pizza shop, and then so does a guy down the street. So, sure, I’ll advertise to try to get more people to come to my shop. That’s called competition and I thought it was a good thing.
Re: Re: Re:2 Another lovely from Mike
I could open up a pizza shop, and then so does a guy down the street. So, sure, I’ll advertise to try to get more people to come to my shop. That’s called competition and I thought it was a good thing.
Opening up a pizza shop and introducing a new, innovative drug are on astronomically different scales as far as difficulty and expense are concerned. Comparing the two is grossly irresponsible.
Yes, competition is healthy, but you should also realize that competition or the threat of competition also keeps others from entering the market or taking the time to invent new and useful things.
Re: Another lovely from Mike
“Same as some Asshole selling copies of copyrighted movies/CD’s at Times Square in NYC. No investment, just burn and turn…..”
NOT the same. To produce a generic drug, as you accurately pointed, there are no R&D costs, so your overhead is much cheaper, etc. However, there must still be some differences, however slight. Thus, that product is now YOURS. An exact duplicate is not yours. Which is what I believe was the ORIGINAL INTENT of copyright/patent laws.
Also, as the cartoon points out, if you try to copy someone who is already up on the game, you can only copy what they’ve already done. You cannot copy what they’re GOING to do, “which is unknowable”. Thus, you must have a RTB your product; usually that means making your product somehow BETTER and not just a copy, “which is stupid”.
Re: Re: Another lovely from Mike
There is a little thing missing once a brand has formed a patented drug in the pharma business there is at least a 7 year period that other companies cannot compete with the original manufacturer.
I learned this when the govt. banned the particular type of propellent in the generic albuterol inhaler, I got stuck having to buy a name brand, knowing that i would not get a cheaper one for 7 years, still haven’t.
Re: Another lovely from Mike
I agree with you that the copier has cheaper fixed costs to cover, which has a downward effect on generic price versus patented price.
But you should admit that that is not the whole reason the generic drug is cheaper. The main reason, in fact, is that the brand drug was sold under a monopoly for the duration of the patent. And the economic certainty about monopoly is that it drives higher prices and lower volumes.
In fact, the main reason the generics are cheaper is because there are many sources of generics, and competitive markets have lower price and higher supply versus monopoly.
Not sure pharma companies would agree. Develop a new drug, get it through the approval process, and then watch as every Tom, Dick, Harry and Sally try to freeload with generics.
Red Queen Race
Seems to me like a Red Queen Race.
http://en.wikipedia.org/wiki/Red_Queen%27s_race
The Dilbert strip certainly makes a point, but it is not universally applicable. If a company spends years developing a product and finding a market for it, and the product becomes popular, how well are they going to do when another company can look at the product, copy it within months thanks to all the legwork the original company did, and sell it on the shelf next to the original product for 10% less because they don’t have the years of development costs to recoup? If the original company needs to sell x units (current market) over several years to make a profit, yet someone could come in within a year and take most of the market with a less expensive knock-off, where’s the incentive and income to develop further?
Competition is good, but the patent system was set up to promote innovation by allowing inventors the protections of a temporary monopoly to recoup such costs. The patent system certainly needs protection from trolls and whatnot, but it shouldn’t be abolished.
Re: Re:
“where’s the incentive and income to develop further?”
There are only TWO certainties that never (significantly) change no matter what happens, or where people are living:
1) People need water
2) People die
Why did I not include food or birth? Because those needs significantly change from place to place, and VERY rapidly.
So unless you sell water or death-related services, you MUST MUST MUST MUST MUST constantly strive to improve your product.
P.S. even water has become a booming business lately, so that is beginning to go the way of food-related needs.
Re: Re: Re:
I agree. But if you’re not getting any income from what you’ve already produced, how can one improve? You could borrow to make an improvement, but what happens when that improvement quickly gets copied? It ends in you giving up and going back to digging a well and subsistence farming. Or going into politics. ;p
Re: Re:
You’re basically saying people won’t take risks in business. They only do something new if they’re sure they won’t have any competition. This is nonsense. If there is a demand not being met, somebody will try to meet it. Usually lots of somebodies. Even without patent protection, someone will decide it’s worth the risk to be the first one in to satisfy a demand.
Re: Re: Re:
I agree to a point. I’m saying that people won’t take as many risks, or may tend to avoid greater risks. Patent protection reduces the risk involved in filling a need, and, as it was intended, promotes more innovation by protecting the inventions and people that create it.
Another lovely from Mike
I forgot to paste these two in. Note Pfizer is now in litigation over Lipitor generics. http://www.fiercepharma.com/story/pfizer-sues-dr-reddys-over-lipitor/2009-12-10
AND….check this out…Pfizer is now getting into the Generic Drug Manufacturing business. Why? Because it’s easier to copy someone else and make a buck rather than put your own R&D into it. If Pfizer can make a generic Aspirin and sell under the PFizer name, which has “Brand Recognition”, then they’re profit margin is that much greater for that product…no R&D.
http://www.bloomberg.com/apps/news?pid=20601080&sid=ayjc2PlZcHnE
Re: Another lovely from Mike
“AND….check this out…Pfizer is now getting into the Generic Drug Manufacturing business. Why?”
Because they realized it’s a market they can compete in. Does this surprise you?
“The quality of ordinary, handheld hammers does not vary much, as long as the head stays on the handle.”
Actually that’s not true, and if you hammered nails for a living you’d know that. Some hammers are superior in material/design to the point that a novice can hammer a straight nail just about every time. Hand him the shit y hammer and the same will not apply. I’m speaking from experience.
While the cartoon makes an amusing point, it fails in many ways to explain what really happens in the real world.
First off, If you are in the same business and a year behind, it is unlikely you are copying someone else, but rather trying to get past them. Mere duplication in most cases is very easy.
Second, if it takes a year to only duplicate it, it probably took many more years to develop – so when you do get there, you will have a “cost of many years” advantage over the incumbent, which will allow you to gain market share rapidly (concept supported by the idea that generic drugs often take large chunks of the market away from expired patent holders)
Third, once you have spent a year to catch up to where the other guy was, and they have then spent the year moving ahead, the time to catch up to them next time should be shorter, as you are already most of the way there. If their 5 year development is your 1 year duplication, then their 1 year development is probably a 2 or 3 month duplication. The longer the game goes on, the closer you are all the time.
So sorry Mike, I guess they didn’t teach you this stuff in econ 101, most of us learn about it in RealLife101
Re: Re:
“The longer the game goes on, the closer you are all the time.”
Zeno’s paradox.
Re: Re: Re:
Arrrgh! I can’t believe you mentioned the Game! And I was doing so well…
Re: Re:
Third, once you have spent a year to catch up to where the other guy was, and they have then spent the year moving ahead, the time to catch up to them next time should be shorter, as you are already most of the way there. If their 5 year development is your 1 year duplication, then their 1 year development is probably a 2 or 3 month duplication. The longer the game goes on, the closer you are all the time.
By this reasoning, nobody ever does anything new without a patent. Car companies for example don’t bother coming out with new models, because somebody else would just copy them. Toy companies don’t make new toys, they just keep producing what’s been done before. What’s the point when somebody else would just copy it?
So sorry Mike, I guess they didn’t teach you this stuff in econ 101, most of us learn about it in RealLife101
If you pay attention in RealLife 101, you’ll see that companies that don’t do new stuff generally get left behind, regardless of whether they have patents or trademarks stifling competition.
Re: Re: Re:
By this reasoning, nobody ever does anything new without a patent. Car companies for example don’t bother coming out with new models, because somebody else would just copy them. Toy companies don’t make new toys, they just keep producing what’s been done before. What’s the point when somebody else would just copy it?
Just so you know, toy companies and car companies utilize the patent system regularly. And yes, if such companies don’t think the expense of R&D to develop these new car models or new toys will be recouped and then some by selling the product when it can be easily copied, then yes, they probably will not develop said products.
Apparently you don’t think it costs much money to employ automobile design engineers or toy designers. I take it you’ve never been a part of such industries.
Re: Re: Re: Re:
Just so you know, toy companies and car companies utilize the patent system regularly.
Of course they do. But they cannot patent everything they do. Some updates/new products are not patentable, yet they come to market anyway.
And yes, if such companies don’t think the expense of R&D to develop these new car models or new toys will be recouped and then some by selling the product when it can be easily copied, then yes, they probably will not develop said products.
“Easily copied” is for the most part a myth. You really think a new car model would be “easily copied”? Toys are simpler, but look at Lego compared to the ripoffs. Lego is more expensive and higher quality, and despite other companies copying their product (to the point where you can snap the different brands of bricks together), they still sell in huge numbers. Far, far more than any copycat.
Apparently you don’t think it costs much money to employ automobile design engineers or toy designers. I take it you’ve never been a part of such industries.
Apparently you like making stuff up about what I wrote. And also making completely irrelevant assumptions.
Dilbert cartoon
Two problems:
1. This cartoon has nothing to do with whether or not we should have a patent system, and
2. “Those who don’t know history are doomed to repeat it”. There are multiple cases of someone having an invention stolen, or refusing to reveal an innovation, etc., to the public because they could not protect it from theft. In fact, the latter is the real reason the founding fathers mandated such as system.
Even so, I do favor changing the CURRENT system, it is awful.