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Jetney Development is an embedded hardware and software design company focused on creating simple and open-source prototyping tools, such as wireless module breakout boards and software libraries.
I first heard this spoken by Chris Anderson at his keynote speech at the Open Hardware Summit in 2012 in New York, and it struck me then as an extremely concise expression of how to run a successful business in an era where it information is duplicated and spread around the world in an instant.
Notice that I didn’t say "information is stolen," because theft implies that the original is no longer there. Such is not the case with information, nor could it ever be. For you to learn something from me in no way affects my ability to know it. Information by nature can only be duplicated, never actually moved. (It is necessary here to make a distinction between "stealing an idea" and "stealing physical media containing stored information," which would actually be theft.)
No, the worst that can be said to have happened when information is duplicated without consent is that someone has potentially lost an opportunity to capitalize on their previously exclusive access to that information. This is why the concept of trade secrets is important, and why non-disclosure agreements exist. These are valuable, legitimate tools, and I have no issues with anyone who uses them. I have never required anyone to sign an NDA myself, but I have signed them when asked and fully respect such agreements—even unofficial ones—on a regular basis.
However, a business model which relies primarily on protecting secret information strikes me as tenuous at best. Sometimes employees cannot be trusted. Networks where proprietary information is stored are never 100% impervious to malicious hacking. Competitors are smart, and reverse engineering is always a possibility. Even if you employ the forceful tools of government-granted monopolies known as patent and copyright, these protections are thin and economically ineffective in the face of infringement taking place on a giant scale in a country on the other side of the world from you, with a different legal framework and a different social concept of information ownership. You can spend a huge amount of precious (and very finite) time and money fighting these battles with nothing to show for it in the end.
Or, you could choose not to.
There is a large spectrum of opinion between an "intellectual property maximalist" position and a wide-open "intellectual property abolitionist" position, and still further distinction between publishing every bit of source data you have as opposed to merely refusing to use patents and/or copyright but still keeping trade secrets where you can. I am not at all advocating that everyone should open-source all of their designs. However, I do believe that it is important–and wise–to build your business to capitalize on things which cannot be duplicated without significant effort inherently, not merely because it is hard to access the proprietary information that would be needed to copy hardware or software designs.
In light of this, I would clarify and further generalize Chris Anderson’s statement above to this:
Data, once stored–that is, "bits"–are infinite for all practical purposes. I can make zero, one, or a thousand perfect copies of something digital with no significant effort and with no degradation of the original. My only real opportunity to control information exclusively is when it is still in my head, by virtue of my having thought it into existence. Once it is communicated to someone else, that person has just as much real control over it as I do. We may have contractual agreements to the contrary, which is fine, but the fact remains that both I and my confidant have the same level of "ownership" in the tangible sense—as far as ownership can even apply to something which by nature cannot be transferred but only duplicated.
Software by itself, therefore, falls into the "infinite" category. Once a particular piece of software has been written, the labor and other investments that went into it become sunk costs. Regardless of how much work it required, the amount of work needed to produce a second "unit" of exactly the same piece of software is effectively zero: just copy it (DRM, a.k.a. "artificial scarcity," notwithstanding). DRM, incidentally, is a legitimate method for attempting to increase marginal revenue for a zero-marginal-cost piece of software, but it is risky because the "value" added is entirely due to inconvenience, rather than improvement. This creates an incentive for enterprising people to put in the effort to eliminate the inconvenience without paying, by subverting the DRM scheme. This result is almost inevitable with any useful tool which reaches a high enough level of popularity.
There are many aspects of software which are not infinite, however: bug fixes, new features, training, customization, and customer support, to name a few. These are the things which cannot be duplicated without significant effort. These are the things which a business should capitalize on.
The same thing applies to hardware, though in a different way since hardware is obviously inherently finite, being made of physical materials. But from the perspective of a small business owner working with relatively small volumes, the practical reality is a bit different. If someone else manages to procure enough capital to duplicate my product design, and then has it manufactured in another country in large quantities, what was finite in my hands will have become effectively infinite in theirs, economically speaking. If I sell a BLE113 breakout board for $30 and someone else begins marketing an identically designed breakout for $15, their resources might as well be infinite, because there is no way I can compete at that level.
The immediate consequence of this course of events is that I will sell less, they will sell more, and customers will be very happy to be saving money on hardware. The market will have shifted such that my existing business model no longer provides appreciable value, and therefore I have to change what I’m doing. Note that I did not say I need to sue them into oblilvion. This would be counterproductive, because even if I manage to win legally (after significant expenditure), I will lose economically in the long run. IP lawsuits like this are equivalent to playing whack-a-mole, where the moles are economic realities of zero marginal cost and infinite reproducibility of information, and the mallet is a convoluted framework of sanctioned monopolies that pretends the laws of economics can be redefined at will. It is a losing battle, especially for small businesses.
The sane approach, the one which will allow a business in this position to survive, is to willingly leave certain areas of productivity up to those who are most efficient in those areas, and focus on the areas where you are more efficient instead. This requires real work on a constant basis. Call me crazy for believing this, but it seems like I should expect to do real work on a constant basis if I want to have any reasonable expectation of making real money on a constant basis. "Create once, sell forever" is a business model which can only work without globally ubiquitous light-speed information transfer technology.
What does this mean for Jetney, as a company which creates designs and publishes full source data and parts lists for all products, in addition to selling the products themselves?
There will always be something new to design, or something old to support. These things cannot be done for free by anyone. I want Jetney to be the best at those things. If I can accomplish that, then business should be good and customers will be happy.