The University D-Economy, Fitt 5

I have been looking at various statements regarding the “D-economy.” It goes by various names–Shanzhai rules, débrouillards, System-D. The Wired write up was interesting. Here is another, from Coley Hudgins at Resilient Family. Here’s another by Robert Neuwirth (who was featured in the Wired article):

This spontaneous system, ruled by the spirit of organized improvisation, will be crucial for the development of cities in the 21st century.

The growth of System D presents a series of challenges to the norms of economics, business, and governance — for it has traditionally existed outside the framework of trade agreements, labor laws, copyright protections, product safety regulations, antipollution legislation, and a host of other political, social, and environmental policies. Yet there’s plenty that’s positive, too.

In other words, System D looks a lot like the future of the global economy. All over the world — from San Francisco to São Paulo, from New York City to Lagos — people engaged in street selling and other forms of unlicensed trade told me that they could never have established their businesses in the legal economy. “I’m totally off the grid,” one unlicensed jewelry designer told me. “It was never an option to do it any other way. It never even crossed my mind. It was financially absolutely impossible.” The growth of System D opens the market to those who have traditionally been shut out.

Now, here’s the thing. This System-D economy matches very well university scholarship. University scholarship has been, traditionally, under the radar of government policy and outside the bounds of institutional controls. If anything, the scholarship version of System-D generated government policy. It was the scholarship version of System-D that gave rise to academic publishing, to the development of sponsored research, and the elements that we come to know today as “technology transfer.” University scholarship is native System-D, “a spontaneous system, ruled by the spirit of organized improvisation.” This goes as well for inventions, software, data, technical reports, research web sites–any of the IP and NIPIA that is developed, discovered, and dicked with in university settings–scholarship System-D’s three great “d” virtues.

The reason for government support for university research, and perhaps what Vannevar Bush saw so clearly was possible, is that it connects government resources with a scholarship System-D approach. The government, in seeking to fund faculty initiatives, engages a D-economy to go find stuff, do stuff, make stuff of all sorts, outside of policy, outside of institutional controls, outside of the regulated and planned world of what was proper and authorized. For science, for social innovation, for technology, for agriculture, innovation lay outside of the conventional wisdom, the elites, the way things are. That there are activists within the ranks of university faculty is to be expected, insofar as they are members of the D-economy. That’s where they will be. An academic entrepreneur is just another way of calling out a D-economy participant, a technology activist, if one will.

What is much less interesting is the activist that is merely the privileged recipient of pay to represent a status quo position, whether on the conventional “left” or the conventional “right.” All that is just institutional activism, and not very D-economic at all.

From this, one can start to see how the efforts by university administrators to take control of the outputs of scholarship and dedicate these to formal “commercialization” programs is such a devastating move. First, look at the way technology transfer is now configured. No longer is it a visible part of a D-economy of agents working with academic technology activists to surface in some part of industry. Now it is an institutional mandate, imposed by policy, transmitted through employment agreements and conflict of interest policies: it is unethical to participate in a D-economy of scholarship and technology activism, even though it is that participation that has created sponsored research–with its $60b or so in federal funding each year–and has created the idea of “technology transfer” as a way to surface D-economy activities in the middle of fun and interesting corporate interests.

Technology transfer has been taken over by institutional interests, much like a museum curator might faithfully recreate a “traditional village.” Very nice, but it *isn’t a working village any more*. For starters, it is in a frickin’ museum. The idea of “commercialization” means, in technology transfer usage, to capture assets produced in the D-economy of scholarship–as early and absolutely as possible–and negotiate their value through institutional relationships (licenses) to leading companies and wealthy investors. When wealthy investors won’t play, then call it a “funding gap” and go for high-minded but gullible government officials. That is, the institutional idea of commercialization of research inventions is to act as a self-interested interface between scholarship and the status quo in two of its pieces–big companies and investors with startups to sell to the big companies.

This sort of “commercialization” is very different from anything that would track “first commercial sale” of a new product or the practical application of a discovery, neither of which requires an institutional license but for an institutional ownership position being asserted. It is a kind of arbitrage, that takes easily obtained assets (IP and NIPIA) and aims to transact them for value with money players–essentially for the speculative value these assets may have. All one has to do is buy low and sell higher. Better yet if one doesn’t have to pay until one sells.

For a university tech transfer program to make money, given a 20 year patent run, one only has to sell high once every 18 years or so. Then it’s gravy for a long while. Imagine that only perhaps 50 inventions every twenty years, out of maybe 500,000 reported inventions, over 120,000 US utility patents, and a trillion dollars of research funding, make the whole “system” of technology transfer a “success” financially. Look at the devastation of the D-economy for the stuff that’s claimed and prevented from moving through the D-economy channels. Look at the waste of research funding! No wonder folks want to turn it into “research as an industry”!  There sure as heck is a huge cork in the output economics. May as well turn huge expenditures, concocted institutional reputation, and assertions of potential into virtues:

“Almost all the bridges we build fail, and most of those that don’t fail work despite our involvement. But look at how much those bridges cost, and what good press we get while working on them, and think of all the potential that these bridges have for the public good. If you prevent us from building bridges, how will the public ever benefit from them?”


For every inventor–and we are talking hundreds per year per university–a whole lot rides on what happens next with their inventions. But for the technology transfer office, nothing really matters if it has a “big hit” deal in place except working the system for the next big deal. There are no careers in the typical American university technology transfer office riding on the disposition of any one invention–or hundreds of inventions. But research, reputation, and careers are often riding on that disposition for each inventor. For the inventor, there is no need for the “big hit” deal or the venture backed startup. In the D-economy, it is a matter of putting the invention into play–maybe by publishing, maybe by giving workshops, maybe by building a better grant funded environment, maybe by helping a graduate student land a company position or an academic job. Maybe the invention is important because it leads to three more inventions before it’s obsolete.

The new compulsory approach to university IP ownership spells the death of the D-economy of university scholarship. The aim of the compulsory approach is to replace spontaneous, organized improvisation with institutional, process-bound, regulated, contract-requiring “commercialization.” It is the worst possible move university administrators could make. It is the worst possible thing for a university president or chancellor to aspire to accomplish. While it may be that a Michael Crow or a Michael Young desires to see his university figure in the economic vitality of his region and the country–excellent aspiration–getting there by taking ownership of all D-economy assets of scholarship and pumping them through an institutional pipe focused on the rich getting richer is ill-advised, if not just plain foolish. The rich can get richer on their ownsome without the university trying to be helpful by shutting down the native D-economy of university scholarship.

This is why the Stanford v Roche decision was so important. It made clear that it was not federal research policy to shut down the D-economy of scholarship by forcing all federally funded inventions through institutional hands. The great value of the D-economy of scholarship has been precisely its spontaneity and ability to organize what it needed to do its thing. When one is dealing with discovery and invention regularly, what one doesn’t need is a system that treats it all the same, strips it down for its arbitrage value in licensing, and then shops it to the elite of the status quo. What one needs is an environment that helps one organize around the distinctive bits of what has happened to make a next move in the D-economy, and maybe multiple moves, and maybe at some point, even a move to an agent to handle patent rights, and maybe that agent would best be the university that hosts the work, depending on what the plan for the patent rights is.

What one doesn’t really want is faculty researchers asleep at the wheel, going through the motions of research because there is money for it and it’s expected, moving from grant to grant to maintain career status, ignoring outputs and opportunities, finding it easier to get the next grant than to help anyone understand what the last one produced. One might say, why, those are exactly the kind of faculty we support with our well oiled technology commercialization system. They can sleep walk right through life, and we are there to help them with their inventions so they can just keep doing that. Oh, and the royalty sharing is just a big confirmation, then, that this indeed is the best of both possible worlds.

The very presence of the technology transfer office as a compulsory system therefore hides the sleepy from the industrious and interferes in the movement of asset equally from the disinterested (which may be a critical element of the D-economy of scholarship) and the invested (also a critical element). The proper virtue in a compulsory system is to be the competent but docile worker. What an odd expectation to have of university faculty!  If they are docile, then they have lost their lights. If they are not, then they are insubordinate and get the boot.

Technology transfer services are not in themselves bad. They have a role, even an important one. That role is not enhanced by making their services compulsory, feigning to treat everyone “equally,” routing a host of assets into a system that can serve very few and needs even less to be wildly financially “successful.” In fact, that role is all but destroyed by a compulsory approach. It is severely compromised by adopting “commercialization” as its goal rather than “collaboration,” and it is of dubious social value if it deals in patent arbitrage rather than in the promotion of use and practical application.

Commercialization and arbitrage can and do happen in the D-economy of scholarship–sometimes even by institutional players. That is part of the spontaneity of things. There is nothing gained by making such a thing compulsory, to be run by an institution, and the institution that otherwise would keep the nest of the D-economy stocked with warmth and worms. Much of the assets of scholarship need never make a commercial product. It is not that they sit idly on some metaphorical “shelf”, but rather that a vast amount of what the D-economy creates is never going to make the transition to “commercial product” in the form that a big company might recognize.

Our communities are not framed exclusively by the presence of commercial products–and by this I mean mass-produced stuff offered for sale. We also recognize craft products–stuff that is made distinctively, one-offs, limited runs. We also recognize stuff that’s not product at all. For instance, to use the example again, the internet–another result of university work in the D-economy. Facebook is another example–not itself a product, and like Microsoft not a product of Harvard “technology transfer,” though as a platform it is worth a lot of money.

The Bayh-Dole Act is an interface between the formal economy of government money, federal agencies, and funding agreements–with its regulations and metrics and accountability and politics and plans–and the D-economy of scholarship, with its wild and crazy technology activists, explorers, and instructors. The university role is to look out after the interface–keep the D-side D-ing, and keep the formal side informed as to the use of funds and the reporting of findings. Intellectual property sits squarely on this border between the two economies. It is not there by accident. It is there deliberately. It is horribly inconvenient to order-loving bureaucrats. They cannot comprehend why something with such potential value could be left with “title uncertainty.” Well, there isn’t any “title uncertainty” in the D-economy. That only happens when a university tries to take things from the border that it has no business taking, or offering, in the first place.

When a university declares its business to own everything in the D-economy of scholarship, and turns this into a virtue of sorts, and aspires then to sort through everything it claims, and to make the business of the faculty and students to beg stuff back (on the condition that it will not go into the D-economy of scholarship), then you have what is going on now. Strip away the noble statements that are hopelessly naive with regard to what a licensing office can do, and you have the proud programs of “Centers for Commercialization.” It will be easier for such offices to stamp out the D-economy, as the University of Washington is doing, than for them to make money on their compulsory ownership system. It will be easier for such offices to go beg economic development money from the state than to let the D-economy work its financing.

It is really a simple progression, once you see the history of things and ignore the bluster, the pseudo metrics, the confirmation bias, and the mis-attribution of causes:

Fitt 1

The D-economy of scholarship is remarkably productive
It becomes the object of interest for government funding
Government funding displaces industry and foundation funding
Some federal agencies aim to take control over inventions coming from it

Fitt 2

The D-economy at a few universities wrestles them back
On the condition that there is a plan for development
These licensing efforts are relatively successful
Thus, Bayh-Dole is passed to normalize the wrestling back
No plan is required, no agency review required, no inventor request required

Fitt 3

Universities then try to increase the volume and scale of their work
If it works for a few things, then make it work for everything
Misinterpreted Bayh-Dole as a vesting statute
Made university ownership of inventions compulsory
Expanded claims from inventions to software and other assets
Established a formal program of claiming ownership early and often
Which diverts, stifles, and criminalizes the D-economy of scholarship

Fitt 4

Stanford v Roche rejects the vesting interpretation
Which offers a chance for universities to reverse course
And match their native D-economy with System D worldwide
Instead, they are trying to institute private vesting through present assignments
So they can attack industry rather than collaborate with it through the D-economy

Fitt 5

Here we are where Fitt 5 will play out. Will universities so stifle their D-economies that faculty and students forget what it’s like for a Fred Terman to be around to help to start an HP or create a research park? Will the D-economy simply side-step patenting and ownership and run below the radar of institutional policies, as covert and policy-criminal as necessary to survive? Will some courageous and thoughtful university leaders run the petty rascals out of control of IP, research, and conflict of interest policies and snip the compulsory obligations that threaten to strangle the D-economy of scholarship? In the psychomachia for the soul of the university D-economy, who will win? The bozonet of institutional tech transfer advocates?  Or the random, spontaneous, self-organizing technology activists, scholars, and explorers?

My thought is that the D-economy will win out. Innovation needs the “black market” of faculty, staff, and student entrepreneurship. It is only “black” because universities have implemented policy requirements tied to employment and use of facilities that “blackens” it. How long will the university presidents put up with this bozonet running tech transfer? How long before they see that the clowns have indeed been sent in, and they are not funny? Stay tuned!



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