I’ve always admired Tim O’Reilly, first as a fan of anything O’Reilly in the world of technical publishing but later on as I became exposed to his writing on the O’Reilly sites and elsewhere.
Last week he posted an essay called Value Creation vs. Value Capture: Musings on the New Economy. Although you should read the full length in order to understand his perspective perhaps a short summary is his contrast of the difference between those who focus on creating value, using basic research and open source as examples, and those who focus on capturing value using “Wall Street” and Patent Trolls as representative.
Tim Berners-Lee, the man behind much of what we understand as “the web” today, created value with his tinkerer’s instinct and problem solving; not a desire to sell the next great product. His example is more representative than isolated – our big innovations (read: value creation) tend to come from basic research, and tinkerers alike.
A foil to what we see with Berners-Lee is the case of SurfCast – a company which shipped no products but is attempting to sue Microsoft (read: value capture) for copying their concept of live tiles in Windows 8. They and many similar companies have become adept at capturing value in a way that is completely disconnected from value creation.
If you’ve got the time, he presents a similar perspective in this interview:
It seems as though recent politic discourse has conflated Value Capture and Value Creation as one and the same but I agree with how O’Reilly characterized their differences. I also lament the fact that recent political dynamics have caused a lot of people to look down on the public funding and incentives for Value Creation. When we cut budgets for the type of research being done at Fermilab, or when we decide NASA is no longer important, we lose the types of places that foster the mixture of science, problem solving, and creativity that deliver immeasurable value to the economy. It makes me sad, especially when most of those moves are just political posturing as “deficit hawks.”
There may be a soft divergence in my views when it comes to Value Capture – I’m not against it and I’d even go further to say that Value Capture and Value Creation have the potential under the right circumstance of a self perpetuating symbiosis. The web that Tim Berners-Lee started off with was catapulted forward by commercial efforts (insert lots of tech/internet companies here) and now those companies are driving the demand for research and new technology (e.g. Big Data) efforts in academic and research settings.
Some of my own concrete ideas about recognizing and incentivizing Value Creation:
- Heavy investment in basic research, especially but not limited to science, engineering, and technology.
- Public / Private partnerships that allow theoretical research to move into the private sector for commoditization. One example is making public research available and free as quickly as possible to those in the private sector.
- Commitment to education both at lower levels but also in research universities.
- Shaping intellectual property rights to prevent patent abuse
- Encouraging immigration for people with basic and advanced degrees, expand the H1 program (worker visas)
Microsoft and Value Creation
One thing I’ve been really happy to see in the last few years is a strong commitment from Microsoft to Value Creation as they have begun to release more and more of their development platforms as open source. I’m sure there are many people to attribute but I’m especially happy to know of some of the people who are working hard to keep what they build free and open to the involvement of a larger community. The efforts of these folks cannot be overstated both in the sense of how they must have to fight a pretty entrenched bureaucracy of intellectual property lawyers internal to the organization and also work at galvanizing the broader community that tends to be lethargic (I include myself here) to participate in the development efforts by contributing changes and providing feedback.
It doesn’t take much for a guy sitting by himself in a basement in the Dakota territory to feel small. Although my goal is one day to develop commercial software of my own design and intent, sometimes it feels as far away from me as the city of Los Angeles. But beyond developing software my hope is to live in the happy medium of both creating value and capturing it.
 I recommend his memoir: Weaving the Web: The Original Design and Ultimate Destiny of the World Wide Web