Thread by @davidfickling

This gets to a key point that I think it badly underappreciated in discussions of China and IP:

Innovation isn't some fixed quantity of ideas, but a habit of work and thinking.

Without that habit, IP theft doesn't help much (thread):

https://twitter.com/danwwang/status/1138264583812968449

To be clear, IP theft is BAD and should be prosecuted. I'm not contesting that.

What I'd like to argue is against the notion that IP theft is SCARY and some sort of fundamental threat.

If anything, it's a telling sign of weakness, and therefore IMO the opposite of scary.

We've had a lot of coverage of late of these cases where some Chinese company is accused of pilfering IP from some American company.

The multiple Huawei cases are the most prominent but the stories are widespread:

chicagotribune.com/business/ct-bi…

The image that this conjures up is of a bunch of state-connected Chinese companies gradually eating away at America's Strategic Innovation Reserve and carrying it back home until China has stolen all of America's IP.

But of course innovation doesn't work that way!

It's a *process* and a *habit*. The best companies innovate all the time, spend on R&D all the time, and thus less and less value from IP that's more than a few years old.

One reason patents expire after 20 years is precisely because it's recognized that the economic benefit a company will still be deriving from its innovation by that time should be very limited.

A really good example of this comes from looking at the auto and rolling stock industries.

Carmakers have been operating JVs in China for decades and yet China exports fewer cars than Slovakia.

bloomberg.com/opinion/articl…

That's IMO because carmakers are big R&D spenders and have been smart at only vesting slightly old IP in their China ventures.

As a result they've basically got one over on the Chinese government. Their state-owned JVs partners are infantilized and, mostly, bad at innovation.

In the Alstom/Siemens case above you'll see that rolling stock companies were much more careless with their IP, again IMO because they are less innovative and therefore less paranoid about IP protection.

But even then Alstom & Siemens have reinvented themselves as providers of more niche, IP-heavy services such as signalling, so it turns out they were fine leaving behind their increasingly commoditized rolling stock business.

If people want something to worry about in relation to China and IP it's the fact that R&D spending there is soaring. Already ahead of eg. the UK in % of GDP terms, and of course China's GDP is huge. data.worldbank.org/indicator/GB.X…

There's a tendency to downplay this statistic as "it's all just low-quality patents, Chinese companies can't really innovate", which IMO is patronizing and very reminiscent of how people once said the same thing about Japanese and Taiwanese and Korean businesses.

Remember that a lot of the stuff people find SCARY in relation to China they find normal in every other context.

We talk about "product teardowns" and the Waymo/Uber case in a totally different way to how we'd talk about the same things being done by Chinese companies.

So people should worry less about China stealing specific IP and think more about China developing innovative habits of work and thinking.

Indeed, if you want something to worry about, it's the risk that, for institutional reasons, China *doesn't* develop those habits.

If China becomes a globally advanced IP competitor its companies will invent lots of cool stuff and its people will become more wealthy.

If it doesn't it may become stuck in the middle-income trap, a far more disturbing prospect on many levels. (ends)

bloomberg.com/opinion/articl…