August Carnival of Trust is Up

Back by popular acclaim, David Donoghue reprises his Carnival host-ship of last year in this month’s Carnival of Trust

For those who don’t know, the Carnival of Trust is hosted on a rotating basis by excellent bloggers, who themselves select what they consider to be the leading posts of the past month.  The host–not me–selects from submitted posts and those of their own searching; they choose how many, and from what walks of life, the posts represent. The only requirements are that the posts be good, the host be scintillating, and the subject has something to do with trust.

David’s blog–the Chicago IP Litigation Blog–of course brings a legal perspective.  But he hasn’t let that restrain him.  In this month’s Carnival, he has selected some excellent posts ranging from leadership (in the US Patent office) to restoring corporate trust, to Walter Cronkite, to an Amazon response to a crisis.

Rich and varied stuff, the food of good thought.  Many thanks to David. 

Blog-jog on over to David’s site to savor this month’s Carnival of Trust.



How Too Many Legal Contracts Are Costing Business

What do work-for-hire contracts, email disclaimers and spam have in common? They are all getting ubiquitous, annoying—and ineffective.

Here’s what I mean.

Trend #1: Business is moving from a vertical management model to a horizontal purchasing model. Consider benefits administration: once a department reporting to the VP HR, now a purchased service, linked to the company by a commercial contract for services.

The Result: more contracts.

Trend #2: Communications and media—like books, records, movies and letters—have been fragmented, even atomized. In their place: email, twitter, web sites, links, sampling, and digitization. Far more opportunities for claims of intellectual property rights.

The Result: more contracts.

Contracts and Costs

Think of contracts as transaction costs. Unlike production costs, contracts add zero value. They are a tax on productivity—necessary for orderliness in a complex society, but a form of overhead nonetheless.

Here’s the problem. Costs of production go down with scale. Transaction costs, however, go up. Often exponentially.

The more commercial contracts, the more detailed the lawyers will want to make those contracts. The more fragmented the bits of sample music are, the more detailed must the IP contracts become to cover all eventualities.

The old response to risk was to create tighter contracts. But as the world becomes more complex, the ever-fertile legal mind will find more and more risk to be mitigated—and will unfortunately default to the only thing it knows—more and more complex contracts.

When quantity of contracts demanded is multiplied by some exponential complexity factor, you’ve got a serious economic issue. It’s hard to nail down the macro-economic costs of complexity, but they are very real. See, for example, Steven Covey’s Speed of Trust or Collaboration Rules by Philip Evans and Bob Wolf.

Still, you can get a visceral example of it by looking at email disclaimers. Spudart offers a tour of 50-plus samples—Great Moments in Email Disclaimers, so to speak—for your reading pleasure.

Or harken back to BusinessWeek’s legal advice to small business owners to use the fine print on sales receipts to protect companies from their customers.

And the Law Offices of Ernest Sasso gives you the downward spiral of logic that leads lawyers to attach such disclaimers to their own email; you can see the slippery slope by which every email by everyone to anyone should—in theory—have disclaimers attached.

It is, of course, ironic that disclaimers usually say "don’t read this if it wasn’t meant for you." Too bad they come at the end, after you’ve read the email.

More significant are increasing clauses in commercial contracts. Five years ago, I wasn’t being asked to certify that my subcontractors on a $50,000 consulting job had automobile insurance. I don’t recall being asked to indemnify huge clients against potential suits by third parties for theft of intellectual property. I don’t recall the ubiquity of IP suits I’m hearing about now.

Only Luddites object to increasing complexity. But only troglodytes insist on pushing the same old tools in changed circumstances, not noticing that the tools are making things worse, rather than better.

Interestingly, parties to contracts are beginning to push back in their own way—through the use of constructive hypocrisy. “Sorry about this, the lawyers are requiring it…you know, this won’t ever really come up…it’s just a technicality, if we ever need to address it we’ve always worked it out before…come on, this doesn’t really have to change things…”

Constructive hypocrisy is often quite preferable to actually trying to live by this contractual spam. Unfortunately, many people insist on actually meaning it. And enforcing it, if only for power plays. And it doesn’t take too many to force the rest to live by it.

Is there an alternative? You betcha. It’s called more trust.

If you think that’s fluffy, read about how one buyer bought an $800 million business in 20 minutes in this Wall Street Journal article.

The buyer? Warren Buffett.


Carnival of Trust for March is Up

The Carnival of Trust for March is up. This month it’s hosted by Duncan Bucknell at his IP ThinkTank blog.

What is a Carnival, you might ask? It’s a blogosphere equivalent of an anthology, in which a host collects of blog postings on a particular subject. The Carnival of Trust, unsurprisingly, collects what we hope are some of the best writings every month on trust.

Duncan has come up with some tasty choices this time. For example, read musings on topics like:

What if the post office ate your Intellectual Property application?

Why is a virtual community like a Koi Fish Pond—particularly with respect to recycling waste?

How can you build trust while facilitating meetings?

Can Finns trust the Finnish government to censor websites? (hint: probably not)

Enough with trusting your lawyer—can your lawyer trust you?

The cool thing about the Carnival of Trust (I think) is that each guest host (the host rotates each month) must limit him- or herself to only 10 choices; the Top Ten of the month. Secondly, each host must succinctly add value in their commentary—think of those great one-paragraph movie reviews in the New Yorker.

Do yourself a favor: click through to this month’s Carnival and enjoy some incisive, interesting writing, courtesy of Duncan Bucknell.

And if that whets your appetite, by all means have a look at past Carnivals.

Like to see your own blog posting in a future Carnival? Submit your blog entry here. Trust me, you can’t win if you don’t post an entry!

Next month’s host will be Mark Slatin, whose musings on trust and business are worth reading any day.

And if you’d like be a future host of the Carnival of Trust, write us at carnivaloftrust-at-trustedadvisor-dot-com

Property Theft or Generation Gap?

David Pogue  is the personal technology columnist for the New York Times. His Wall Street Journal counterpart, Walt Mossberg, plays the practical, straight-shooter  to Pogue’s edgier and more expansive ruminations.

Case in point: Pogue’s article “The Generational Divide in Copyright Morality.”

 Pogue sometimes speaks to audiences who are outraged at copyright thievery, $2.00 DVDs of first run movies or $10 copies of Windows hawked in Hong Kong, knock-off designer bags in New York, scams, con men and property theft in general.

He asks them; “if you own a CD and it gets scratched, and you borrow one from the library to burn a copy—is that wrong? If you make CD copies of old vinyl LPs you own? What if you burn a copy of a movie you rented from Blockbuster?”

He leads listeners down a garden path of increasingly discomfiting examples, with more people at each point willing to call it “wrong.” His point: “wrong” is a nuanced view, not black and white. And it’s a powerful example.

Until—he spoke to a college audience of 500.


Pogue went all the way down his usual garden path, and got only two people—in an audience of 500—who characterized his endpoint as “wrong.”

…to see this vivid demonstration of the generational divide, in person, blew me away.
I don’t pretend to know what the solution to the file-sharing issue is. (Although I’m increasingly convinced that copy protection isn’t it.)
I do know, though, that the TV, movie and record companies’ problems have only just begun. Right now, the customers who can’t even *see* why file sharing might be wrong are still young. But 10, 20, 30 years from now, that crowd will be *everybody*. What will happen then?

Pogue is on to something—but it’s not generation gaps. Generations are the second-order indicator of something much bigger.

It’s the disconnect between old belief systems—forged in a different business and technology world—and the new reality.  We are inhabiting an inter-regnum, a period where old beliefs don’t fit the new reality—and the new belief systems as yet unformed.

Emile Durkheim wrote about the shift from one mode of civilization to another; the result, if I recall correctly, was what he called “normlessness.” And it created anomie—a sense of disconnectedness, a lack of cohesive social principles, manifested in individuals as a sense of not belonging.

This disconnect between old beliefs and new reality shows up in several places: the purchasing function is one (old belief—compete with suppliers to squeeze costs out of them; new reality—collaborate with suppliers to create cross-corporate supply chains).

But Pogue’s example is the most vivid. It’s about property rights—the intellectual rights of music, movies, books, software—but also “hard” property like art or design as they become “copied” or digitized.

Technology relentlessly drives toward communalization of property. “Information wants to be free,” was the anarchic claim of the early digerati, and I think they were right. And the more free it becomes, the more Pogue will get blank stares from new generations.

Property owners can partly blame themselves. When videocassettes were introduced, movie companies’ first impulse was to sell, not rent, thereby implicitly degrading their rights to the content.

Remember Microsoft howling about counterfeit Windows in China? But Bill Gates knew full well that every counterfeit Windows user meant one less Unix user; tolerating counterfeiting wasn’t a Faustian deal, it was a plain old one.

We live in a normless time regarding digitizable property. We continue to infinitessimally slice “rights” of music artists, writers and producers to allocate tiny revenue streams from other artists’ 2-second samples sold through DVDs, online streaming media and media yet to be dreamed up. Counting angels on the head of a pin? The Lawyers’ Full Employment Act.

Lawyers will howl.  Software producers, artists, record companies will howl. Moralists will howl. And data will continue to become freer.

The howling will stop when we develop a new set of norms, appropriate to the new conditions on the ground. Pogue’s generational comment is accurate, as far as it goes. And normlessness does rhyme a bit with adolescence and punk rock, for that matter.

But ultimately it’s not about age. It’s about the changing of the social contract.

Change on the ground precedes and drives business models.  Business models then drive ideologies, belief systems, norms, laws.  Ideologies get enforced by lawyers, and lawyers get hired by those who benefit from the status quo.  Until change on the ground starts the whole cycle all over again.

Pogue is correct that “wrong” is a nuanced word.  So is “rights.”  Property rights are not absolute.  We have made "property" of women and black people, air and water—and un-made them.  In the scheme of things, re-thinking the status of a Wu Tang Clan track or an Adam Sandler flick might be just a tad easier.