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The Permission Problem
Aug. 11th, 2008 10:34 amhttp://www.newyorker.com/talk/financial/2008/08/11/080811ta_talk_surowiecki?printable=true
In the second decade of the twentieth century, it was almost impossible to build an airplane in the United States. That was the result of a chaotic legal battle among the dozens of companies—including one owned by Orville Wright—that held patents on the various components that made a plane go. No one could manufacture aircraft without fear of being hauled into court. The First World War got the industry started again, because Congress realized that something needed to be done to get planes in the air. It created a “patent pool,” putting all the aircraft patents under the control of a new association and letting manufacturers license them for a fee. Had Congress not stepped in, we might still be flying around in blimps...
When different companies own adjacent patches of an oil field, each will be tempted not only to drill its own patch but also to try to suck out the resources of its neighbor’s patch. For geological reasons, overdrilling actually reduces the total amount of oil you can get out of the field—all sides end up worse off...
When something you own is necessary to the success of a venture, even if its contribution is small, you’ll tend to ask for an amount close to the full value of the venture. And since everyone in your position also thinks he deserves a huge sum, the venture quickly becomes unviable...
In the second decade of the twentieth century, it was almost impossible to build an airplane in the United States. That was the result of a chaotic legal battle among the dozens of companies—including one owned by Orville Wright—that held patents on the various components that made a plane go. No one could manufacture aircraft without fear of being hauled into court. The First World War got the industry started again, because Congress realized that something needed to be done to get planes in the air. It created a “patent pool,” putting all the aircraft patents under the control of a new association and letting manufacturers license them for a fee. Had Congress not stepped in, we might still be flying around in blimps...
When different companies own adjacent patches of an oil field, each will be tempted not only to drill its own patch but also to try to suck out the resources of its neighbor’s patch. For geological reasons, overdrilling actually reduces the total amount of oil you can get out of the field—all sides end up worse off...
When something you own is necessary to the success of a venture, even if its contribution is small, you’ll tend to ask for an amount close to the full value of the venture. And since everyone in your position also thinks he deserves a huge sum, the venture quickly becomes unviable...
