Intellectual Ventures (and Technological Evolution)

(I created a Wikipedia article from this post.)

Check out this MSNBC profile on Intellectual Ventures, a company created by Microsoft alumni Nathan Myhrvold with a bold new business plan: create a marketplace for intellectual property. Rather than produce any material good, the company does nothing but buy up patents and lease them to the highest bidder.

This development is significant because I believe that intellectual property trading will become, in one form or another, the primary business of the 21st century, and ultimately the final stage of mankind’s technological evolution. While material goods will remain valuable as long as human beings depend on material values for their survival, the primary trend of technological development is the substitution of physical labor for mental labor.

Technological Evolution:

The evolution of technology (which I define as “a material entity created by the application of mental and physical effort to nature in order to achieve some value”) in human history has followed three stages.

The pre-technological period, in which all other animal species remain today, was an pre-rational period of the prehistoric man.

The emergence of technology, which was made possible by the development of the rational faculty, paved the way for the first stage: the tool. A tool is material object such as a spear, arrow, or hammer that augments physical labor to more efficiently achieve his objective. Tools allow man to do things impossible to accomplish with his body alone, such as seeing minute details with a microscope, manipulating heavy objects with a pulley and cart, or carrying volumes of water in a bucket.

The second technological stage was the creation of the machine. A machine (a powered machine to be more precise) is a tool that substitutes the element of human physical effort, and requires the operator only to control its function. Machines became widespread with the industrial revolution, though windmills, a type of machine, are much older.

Examples of this include cars, trains, computers, and lights. Machines allow humans to tremendously exceed the limitations of their bodies. Putting a machine on the farm, a tractor, increased food productivity at least ten fold over the technology of the plow and the horse.

The third, and final stage of technological evolution is the automaton. The automaton is a machine that removes the element of human control with an automatic algorithm. Examples of machines that exhibit this characteristic are digital watches, automatic telephone switches, pacemakers, and computer programs.

Ultimately, this evolution follows two trends: the replacement of physical labor with more efficient mental labor, and the resulting greater degree of control over our natural environment, including our ability to transform raw materials into ever more complex and pliable products. This process culminates with man’s ability to achieve all of the material values technologically possible to him by mental effort. (It is unlikely however, that we will want to do this, since we enjoy some forms of physical labor – such as gardening, weaving, driving, or brushing our hair.)

The economic implications of the above theory is that intellectual labor – and thus intellectual property will become increasingly more important relative to material labor and physical goods. The creation of a market for intellectual property is an indication that our civilization is transforming into the final stages of technological evolution. For obvious reasons, it is not surprising that the leader in this field is a former manager from Microsoft, the leader in the creation of automaton-type technology.

(The tool-machine-automaton idea comes from Czech philosopher Radovan Richta’s 1967 publication “Man and Technology in the Revolution of Our Day”)

8 Comments

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8 Responses to Intellectual Ventures (and Technological Evolution)

  1. Pingback: Mises Economics Blog

  2. Ohhh Henry

    Speaking as a patent holder, I can assure you that patents by themselves don’t mean jack.

    People who have great ideas never see a cent unless they own the factories which produce and sell the products of their brain. Tesla is a good example of this.

    There are literally thousands of factories in Asia which produce – royalty-free – practically everything of value that anyone in the USA ever patented, trademarked, or copyrighted. You block the pirated goods from importation into the USA, but so what? It is the Asian countries which are growing markets, not the USA. And all the slick lawyers in America won’t be able to compel Asian companies to pay royalties for making and selling widgets in Asia. Neither will all the cruise missiles.

  3. Kaz

    One fallacy in your argument is the assumption that intellectual property is anything but a bogus government-imposed monopoly. The reason property rights are important is that REAL things have scarcity. This means that if I want to cut down a tree to make furniture, someone else wants to use it for firewood, and you want to keep it as it is and harvest apples off of it every year, SOMEONE has to decide which of those things will happen. Thus there /must/ be clear demarcation of property rights for real things. But ideas are infinite, once they cease to be secret. If I cut down that tree and make a chair out of it, then you can’t use it for apples. But if you SEE the chair I’ve created and decide to build your own, you haven’t deprived me of my chair, even if I invented it.

    Intellectual monopoly laws are harmful to society, unlike real property laws. They are more akin to the trade monopoly laws of mercantilism than to real property. And the arguments that we must have such monopolies in order to have creativity are as false as the old claims that we must have trade monopolies like the East India Trading Company, to have commerce.

  4. y_feldblum

    I applaud Myhrvold’s plan. Just such an ideas clearinghouse would be a great innovation in nearly every market.

    However, I don’t think intellectual property trading will be the biggest business. That title is and always will be reserved to the trading of values. Intellectual property is one part in a means of producing salable values; but it is not a value in and of itself, without regard for purpose.

  5. fred gore

    IT IS THE STOCKMARKET OF THE FUTURE!!!!!!!!

  6. _Infring.arghr-

    I think IP is the only effective way to take a start up company to profitability. Intellectual Ventures is only the beginning, if anything the state university system has been doing this for years. The top universities have diverse portfolios with patents in the thousands. They can bring in hundreds of millions of dollars!!! Billions nation wide!!!!!

  7. Pingback: The One Minute Case For Technology » The One Minute Case

  8. Most countries in the third world never respects intellectual property rights. piracy is so rampant in asian countries.,.’

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