IP in China

In business in China they hardly admire cleverness at all. They care mostly about being big. The bigger the better. They never had an enlightenment and as a result cleverness is not admired in the same way as it is in the West. It’s cultural.

In the West cleverness is admired in business as well as being big.

So in the West we have some guidelines and rules to protect small and clever companies from the bad behaviour of big companies such as patents, copyright and trademarks. Although these aren’t as useful as they once were, they are still there in principle. Culturally, in business in the West we do admire cleverness.

What came first, the guidelines & rules or the cleverness? My guess is that they co-developed in the enlightenment period and times after. The admiration of cleverness in the West is hard-baked into our systems.

And yet the Chinese, in many business sectors are running over the top of Western companies, both big and small.

So maybe their approach is better. Or maybe not. Is cleverness over-rated?

The latter day emergence of the Chinese has been due to a number of factors:

1. A clever approach to printing money by the government in China and then making that free money available to business without creating excessive inflation that would cripple their economy.
2. A slap-happy approach in China to infringing the IP rights of Western countries.
3. A focus by the Chinese on grabbing older-school technologies from the West and making them cheaper. Here patent protection is far more incremental than newly emerging and strongly protected platform technologies.
4. In the West there has been a shift of R&D dollars towards investment into internet enabled technologies where strong patent protection is much harder to achieve. And even here the Chinese have been smart – they have blocked Western players from entering the Chinese market for national security reasons and promoted their own home grown copies.

Today, however, it’s getting interesting. China has realised that it has passed peak technology absorption from the West. That is, it has grabbed well over half of the industry sectors that are readily available to be stolen by the use of excessive free capital.

Their problem is that they need massive growth in their economy for a longer period than they can sustain with stolen technology sectors. This is a guess on my part, but my assertion is that they will run out of economic growth well before they can fix the inequities in their social systems. And this is a big issue because it may lead to political instability in China which is a big issue for the whole world.

The mental thought process of every CEO in China is to become too big to fail. The leaders of China also think the same way, and China of already too big to fail.

A rational solution would be for Chinese companies to pay fair dollars for new platform technologies developed in the West, thereby encouraging investment into small and clever technology companies in the West.

Part of this solution would be some stronger and cheaper patent enforcement in China, not to enhance innovation in China but to enable the high-value sale of technologies from the West to China.

I don’t think there’s much point China attempting to become innovative itself. They will try but it isn’t their solution, of this I am sure. You can’t simultaneously have a culture of ‘big is best’ and be genuinely innovative.