You may have heard of the "ownership" society. It's a government initiative to encourage people to own -- stocks, homes, property, etc. -- and stop renting and leasing things that wind up costing more money.
I tend to stay out of politics, but there is plenty of value in owning as opposed to renting.
That's especially true of investing. While it’s true that you can own a car, or a membership in an expensive golf club, or a great wardrobe, at the end of the day, the creation of wealth is driven by three types of ownership – ideas, real estate and stocks.
In the next three blogs, I'll delve into the benefitd of each. Let's get started.
Ideas
Last year, in a South African courtroom, global pharmaceutical firms challenged a law that permitted the manufacture and importation of generic aids drugs. The companies quickly dropped this claim, however, when the defense of their patent rights became a public relations fiasco. Indeed, just prior to last year's World Trade Organization meeting in Doha, Qatar, South Africa's health minister called the high prices for lifesaving medicines a "crime against humanity." Ten thousand miles away in San Francisco, the music industry tried to take down Napster, a service that allowed users to swap digital music files over the Internet. In this case, the courts agreed that Napster's file-sharing technology violated music copyrights. And across the Atlantic, advocates of "software libre" are introducing legislation in several European parliaments to give preferences in government procurement to software that can be freely copied and distributed. The Eurolinux Alliance argues that only free software "preserves privacy, individual liberties, and the right for every citizen to access public information."
Battles such as these are erupting all over the globe. At stake are decisions about how society can best encourage the creation of ideas, when someone can stake a claim to intellectual property, and how far copyright- and patent-holders can go in preventing others from taking their property. The scope of the controversy is vast. It might encompass debates about ownership of the formula for an aids vaccine, a Miles Davis riff, a software algorithm, or a new way of uncorking a wine bottle. Each of these is an idea embodied in physical forms: formulas, notes, code, or drawings are turned into capsules, records, CD-ROMs, or corkscrews. The economic consequences of the dispute are also immense. The resolution of who gets to own what, where, and for how long will determine how much corporations and entrepreneurs invest in creating intellectual property, where they will sell products based on intellectual property protection, and how much they will be able to charge for these products.
The current explosion in controversy over the protection of ideas has three main causes. First, brainpower drives the modern economy: there are more demands to own ideas and more demands for cheaper access to ideas. Second, technological change has made it harder to protect ideas. More people want to use technology to get access to intellectual property. The owners of this property want to stop or at least limit these attempts. Third, globalization has made it easier for intellectual property to spread to parts of the world with weaker protection of ideas. In a variant of Gresham's Law, the one nation that does not protect patents within its borders can drive down global standards, making it harder to enforce ownership rights everywhere.
On top of these trends, the output of the "idea industry" has grown exponentially. More books, movies, drugs, music, software, and video games exist today than at any time in history. Still, the basic tension over intellectual property remains the same. The originators of innovative ideas are trying to stop people from using the fruit of these ideas for free.
Why? Because ideas are a root source of wealth creation. If I own an idea, I can use that idea to create a business and drive a revenue stream. Protecting that idea is central to personal wealth creation.
Next blog -- real estate.