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Monthly Archives: February 2012

Instant gratification determines decisions, even against our best interests

Harvard researchers found that wellness programs at organizations resulted in gains of $3.27 for each dollar invested. Yet programs like these are few and far between. Even asking CEOs, like CEO of the Energy Project Tony Schwartz did at Davos, whether wellness programs are beneficial for business, and all CEOs said yes. Yet again, few implement wellness programs at their companies.

From pollution to eating habits to drug use, there is a recognizable pattern of humans making decisions based on the short term gains (laziness, enjoyment, small rewards), even when the long term costs are well known. 

Our incentive systems have gravitated toward rewarding these short-term gains. Stock price now determines a CEO’s worth, rather than building a sustainable business. Daily poll tracking in politics makes politicians legislate for the immediate campaign rather than invest in long-term gains.

This makes companies more reliant on their current profits. And because politicians are always campaigning, they will pass laws to protect those profits in order to raise money for the endless election cycle.

On an individual level, neuroscientists have theories for how to retrain people to mentally account for the long-term costs and benefits in decision making, the type of thinking people more often rationalize away. 

From a business and legislative level, we need to create incentives that encourage long-term planning because that, in the end, generates more revenue and profits even if there are initial losses. Reducing stock price as the main barometer of CEO performance would be the most obvious change (or adjust the time table to judging the stock price over a two year period rather than quarter to quarter).

The Innovator’s Dilemma further explains how companies ignore the long-term. Often, companies under-estimate the speed of changes to the market, preferring to hold onto their current profits rather than invest in a long-term risk. Newspapers, for example, have continued instituting paywalls online in order to stave the loss of readers from their more profitable print publications. The long-term plan would involve investing in the online market, recognizing that that is the growing market, possibly at the print publication’s expense. Because the longer newspapers wait, the more competitors step forward to dominate the new space. Kodak, who invented digital cameras more than a decade before everyone else, focused on its profitable photo printing business. By the time that business collapse, almost every other consumer electronic company had digital cameras on the market and Kodak is facing bankruptcy.

Apple versus Samsung: Patent monopoly versus antitrust

Patents are already government granted monopolies. Though we normally think of monopolies as bad things, patents (and copyright) are nothing but exclusive power over a specific item or area or expression, allowing the patent holder to charge whatever they choose or withhold the technology or expression.

In some cases, when one or many patents cover a set technology, standard licensing agreements are set up, otherwise it would be too expensive or time consuming for a new business to negotiate all the licenses needs. These standards, however, are a band-aid to try to remedy problem that patents are hampering innovation. This type of licensing agreement covers everything from ethernet cables to web video encoding.

Absent these licensing agreements, lawsuits run rampant. Apple and Samsung are tied in a global legal battle over patents, trade dress, and other legal issues. Like most patent cases, Apple sued Samsung over patents, so Samsung sued back over its own patents. Each has filed lawsuits in the U.S., Australia, and several European countries, 10 countries in all so far, with each battle playing out on its own (and costing each company millions of dollars).

European authorities are now investigating Samsung for antitrust violates related to its patent licensing, specifically against commitments to license patents related to mobile phone technology.

The EU is accusing Samsung of antitrust violations over its government granted monopoly.

If the EU is worried about anti-competition activities, why is it granting these patents in the first place? The main function of the patent is to block others from using that technology without the patent holder’s permission. Companies form these patent licensing agreements in order to protect themselves while still blocking out competitors not included in the licensing agreements. I don’t have the specific details of Samsung’s 1998 agreement. There are agreements that because of a technology’s standardization, like some mobile technologies, that companies are required to license their patents. But again, I ask, why give them the patent? If some technology has become so standard and widespread, was it really non-obvious when first developed? Or is it something so simple, everyone working in that space knew they needed the same thing and all invented it separately (which is usually the case).

Instead of asking whether Samsung and Apple’s patents are truly non-obvious and needed to encourage innovation, the EU wants to create a more complex set of laws with antitrust that make it even harder to innovation and gives more money to lawyers.

Patent lawsuit over smart thermostat

Amid all the patent lawsuits around mobile phones, is easy to forget just how mundane patent lawsuits can get, yet still affect our daily lives.  Nest, the makers of a critically acclaimed smart thermostat, is the target of a lawsuit from Honeywell, a long time thermostat manufacturer.

Created by one of the original designers of the iPod, Nest’s thermostat learns user habits to automatically change the temperature, has an auto-away feature, and scans the thermal decay of your house to save energy. The patent lawsuit, which includes retailer Best Buy as a defendant (even though Best Buy does nothing but sell the product), lists several patents Nest allegedly infringes:

  • U.S. Patent No. 7,634,504 – "Natural Language Installer Set Up for Controller"
  • U.S. Patent No. 7,142,948 – "Controller Interface with Dynamic Schedule Display"
  • U.S. Patent No. 7,584,899 – "HVAC Controller"
  • U.S. Patent No. 7,159,789 – "Thermostat with Mechanical User Interface"
  • U.S. Patent No. 7,159,790 – "Thermostat with Offset Drive"
  • U.S. Patent No. 7,476,988 – "Power Stealing Control Devices"
  • U.S. Patent No. 6,975,958 – "Profile Based Method for Deriving a Temperature Setpoint Using a ‘Delta’ Based On Cross-Indexing a Received Price-Point Level Signal."

Honeywell actually invented a smart thermostat almost 20 years ago and has since sat on the technology. “We found that consumers prefer to control the thermostat, rather than being controlled by the thermostat,” said Honeywell’s president of environmental and combustion controls division Beth Wozniak.

Honeywell, instead of innovating on a new technology, did nothing with it.  That is not the intention of the patent system. Patents are supposed to “promote the progress of useful arts and sciences.” When Nest releases an exciting new device, Honeywell sues trying to block the innovation.  Thermostats are far from a highlight of interior decorating, but they serve an important function in a household.  The more technology we lock up in patents that go unused, the slower we’ll discover new functions to make our lives easier and more efficient.