Last week, China bypassed the World Trade Organisation agreements and using an old law officially launched a probe into Americas intellectual property practices.
China's foreign affairs minister, talking of America, stated that:
“We’ve come to the conclusion that they’re in an economic war and they’re crushing us.”
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Reiterating this stance, a Chinese Communist Party spokesman went on to say:
“The economic war with America is everything and we have to be maniacally focused on that.”
“If we continue to lose it, we’re five years away, I think, 10 years at the most, of hitting an inflection point from which we’ll never be able to recover.”
China’s president Xi Jinping explained things further:
“It’s my duty and responsibility to protect the Chinese workers’ technology and industry from unfair and abusive actions.”
“We will stand up to any country that unlawfully forces Chinese companies to transfer their valuable technology as a condition of market access. We will combat the counterfeiting and piracy that destroys Chinese jobs.”
Actually, none of that happened. At least not that way around.
Think about it for a minute. Put the shoe on the other foot and it seems outrageous… because, well, it is.
Ok now I’ve just three things to say about this.
- Whenever a government – who we should remind ourselves is not a producer but rather a consumer of resources – states that they are having “their” intellectual property stolen, this should make the private individuals, corporations stakeholders, and employees of those companies stand up and say: “Whoah! Hang on a second… You don’t own that. I do. What the hell?”
It’s a strange situation where the guy who got a C average in his high school finals and never made it into university but actually runs a business dealing with China can see it makes no sense but a politician with a degree from Oxford cannot.
When some Chinese company copies the iPhone, it’s not Washington’s IP they’re stealing. It’s Apple’s. Nobody wants Washington’s IP because raw sewerage isn’t valuable. That Washington lays claim to the IP of all US businesses should scare the isht out of any US-based company.
Which brings me to my second point…
- Imagine you’re a US company with most of your value in your business being in IP. Now, imagine further that Washington brings about a trade war. What happens next?
Well, your product has just been cut off from THE world’s fastest growing consumer market in the world, and the decision as to whether or not you would participate in that market was just taken away from you whether you like it or not.
That’s all dandy if you’re 4. Parents need to make those calls for you until you’re emancipated. But you’re a grown adult entirely capable of making that judgement call all by yourself.
A couple of reminders are worth looking at…
When I was explaining how China is increasing political global power, I mentioned that China is:
- Asia’s largest trading partner
- US largest trading partner
- Germany’s largest trading partner
- Australia’s largest trading partner
- Russia’s second largest trading partner (after Germany)
- Africa’s largest trading partner
- South America’s largest trading partner
So you see the trend is most certainly established, and this trend is like a supertanker – difficult to turn around. It’s certainly a lot smarter to get on the right side of that trend than to fight it… which is impossible.
The other thing with IP is precisely what I was rabbiting on about in when discussing the coming financial disruption. You see, governments, and the nation state in particular, survives by commandeering assets. Don’t believe me? Stop paying your property tax and find out who exactly owns your house.
This sort of control is kinda easy when the assets are Billy’s steel factory but when it’s something like Vitalik Buterin’s Ethereum platform or Google or Baidu… or any number of the thousands of companies out there where IP forms the largest value component, then things get a wee bit trickier for the nation states.
Moving IP is really very easy. It involves cancelling your gym membership, downloading software onto an encrypted drive in the cloud, and booking a one-way ticket to someplace friendlier.
- And the third thing… Ok, I lied. I’ve only 2 things to say, though I do think there’s a single reason for all this.
The Real Reason for This Stupidity
While it could backfire more spectacularly than a 50-year old Lada, it’s probably this:
Washington’s strategy to dealing with North Korea has been attempting to get Xi to do the dirty work on that snotty kid next door who’s making them look impotent. It’s silly as I mentioned last week when I explained how brain dead sanctions on young Kim really are, which is all the more reason why politicians will pursue it.
Let me make a suggestion, because let’s face it, I’m not here to do anything other than figure this stuff out and see where and why capital will flow in any particular direction.
Governments, most of them being more broke than Borris Becker after Forbes & Manhattan screwed him over, are coming for our assets. The toughest assets to actually seize are those that live in the “digital world”… which is to say their value is more often than not in intellectual property and as such they can “live” pretty much anywhere.
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If you’ve a business built on IP, then may I suggest that looking NOW, ahead of trouble, for the best domicile could well provide you with the best ROI you’ll ever get.
And I won’t charge you a cent for the advice, though you can send donations to Bitcoin Address: 1LNjVKrv8pT1n5SZxkhNpPN9JPWxMwnHmm
Seriously, though remember Zimbabwe, which I spoke about recently? Well, after Mugabe seized all the fixed assets, they found that without the intellect available (it’d fled) those assets became worthless. And while that’s the case the intellect has moved on. It now provides value in other countries, countries that are more receptive to value.
What's more valuable?
- Human capital
- Something else? (Comment on the blog)
“If protection of intellectual property begins to disappear, creative companies will disappear or never get started.” — Steve Jobs.