February 12, 2013

Human nature being limited and human desire boundless, sky high goals set up Icarus for a fatal fall. Yet the masses must shoulder sudden economic stagnation whenever their society stops to scale up. No wonder society finds it so hard to help its members live happy and productive lives.

If society cannot enjoy continuous growth without giving wings to would-be Icarus, how can it achieved stability with such improbable flight plans? Although the path to harmonious development will always be a bit too ideal, we can at least try to understand what practical obstacles are in the way, starting with the temptation to replace truth by theater.

Nothing is more potent than mutual hypocrisy, when two opponents proclaim peace to be their objective while war solidifies their grip on power.

Sample this story "of crisps, crusades and Christianity" (*). "Pret A Manger unveiled [...] spicy tomato crisps [...] called [...] Virgin Mary". "Within a day, [appeared] an angry blog post about the demeaning of [the Virgin Mary]". Robert Shrimsley savors the opportunity to spread his knack for irony on this snack, and concludes "a mighty church does not campaign against crisps".

Indeed if he does not dine daily on a religieuse (1), it is the fault of his favorite pastry shop, not because of the local preachers. But had I half his talent, I would have penned a column from a more penetrating perspective. It's all about money. Pret A Manger was practicing ambush marketing (2), to capitalize on the free publicity generated by centuries of investments by the Catholic Church, with the support of most other Christian faiths.

Assume though Pret A Manger had officially sponsored the 2012 Olympic Games. What do you think would have happened if some clever London club had launched "Pret's Crunchy Rap" on a billboard decorated with five rings? The miscreant would have immediately felt the full wrath of the British law. By holding commercial enterprises more sacrosanct than churches, our secular society encourages fundamentalism to flourish.

Religion however is merely a pretext for fundamentalist fervor and eprivacy will do just as well. Truth is the real danger.

Google and its brothers may publicly fight with the Federal Trade Commission and the European Commission over the confidentiality of consumer data. They are secretly happy nobody ever mentions such a fight is a show as there is no need to trade-off innovation and growth against eprivacy. For, go down this route and Google would have to give consumers a fair share of the added value created by their data. It much prefers to proffer some meaningless privacy promises. Losing the latter, litigious privacy advocates would likewise see their inexhaustible spring of lawsuits run dry.

To speak of a fight is a stretch when the Federal Trade Commission contents itself with well intentioned suggestions (3) and meek admonitions. In the case of the European Commission, the fight may be more for real. James Fontanella-Khan has it from EU commissioner Viviane Reding "that the EU was determined to respond decisively to any attempts by US lobbyists [...] to curb the EU data protection law" (**).

Cynics may ask whether, in this case also, eprivacy is but a pretext for a classic transatlantic power play on protectionism.

Hasn't "William Kennard, US ambassador to the EU" declared that "Europe, the US and other democracies [...] need to accept that each [...] has the right to choose whatever legal framework is best suited for them". In other words, states should be free to practice competitive legal dumping and find which bows the lowest to the superior strength of corporations behaving for all intents and purposes as non state world powers.

One can always hope Europe and the US realize one day their role is to care for their citizens and resist the rule of the new Vandals and their corruption of democracy. Instead of quarreling among themselves, they should share a common approach, for example by promoting a privacy tax.

In part the problem stems from the tendency of the United States to cling to the large corporations they bore as if innovation depended on them. It is but an illusion. Google's ingenuity is genuine but flowed at a time when Google was a dwarf compared to Microsoft. And who brought us the modern browser but nimble Netscape? No doubt Microsoft was once a force for change, but it happened when it was still in the shadow of IBM.

Its very own and well deserved success has turned Google into a giant utility with a bully behavior. Should one tolerate it in view of the star system adopted by society? It holds that bringing down Google back to earth would discourage the thousands of would-be Icarus who dream to match its record. This is a fundamental error. Set early and wisely, limits allow a scope which appears boundless to the entrepreneur still on the ground.

Society sustains growth by setting limits. This idea, paradoxical perhaps, can free both individuals and corporations from destructive obsessions.

"America's patent system is a mess", writes Joe Nocera (***). No originality there, his purpose is to popularize Judge Posner's remedy, who "insists that [patent litigants] calculate precisely how much the infringing component is driving demand for the product". How can such a calculation be precise? Rendering patent wars uneconomical, Judge Posner wants to force the parties to negotiate peace. His aim is correct, his method is novel but flawed. Wouldn't reasonable limits on how much a patent is worth relax the need for precision and make negotiations much simpler?

As "the official winner of the 2004 Tour [de France]", Lance Armstrong "was awarded $7.5 million in a settlement" with a sponsor which suspected him of doping. Sued again because his title has since been invalidated for that very reason, the bicycle rider admits he lied but his lawyer maintains "that settlement was final", Juliet Macur reports (****).

Crooks looking to get off the hook notwithstanding, society should limit our capacity to make contracts full and final. And if a monetary component no longer makes contracts complete, it not only protects against lasting lies, it enables reputation backed recommendations to beget new growth.

Our Information Age should not be a return to some golden past. Without limits, its underlying logic of honor would bring back murderous duels and vendettas. Instead capitalism limits non fraudulent liabilities, modern justice reserves the right to punish for itself and Floyd Norris reminds us even this right is subject to "five-year statutes of limitations in some fraud laws", lengthened to ten if the fraud is against a bank (*****).

The human drama stems from an impulse to resist and if at all possible to ignore all limits. Yet what befits an entrepreneur will plague a society.

Philippe Coueignoux

• (*) ......... Of crisps, crusades and Christianity, by Robert Shrimsley (Financial Times) - February 7, 2013
• (**) ....... EU refuses to bend on tough data privacy law, by James Fontanella-Khan (Financial Times) - February 11, 2013
• (***) ..... Innovation Nation At War, by Joe Nocera (New York Times Magazine) - February 9, 2013
• (****) ... Company Sues to Recoup Money From Armstrong, by Juliet Macur (New York Times) - February 8, 2013
• (*****) . In Actions, S.&P. Risked Andersen's Fate, by Floyd Norris (New York Times) - February 8, 2013
• (1) for more details, see religieuse in the wikipedia
• (2) for more details, see ambush marketing in my "Liabilities and Vulnerabilies in the Information Age" lectures
• (3) for more details, see Mobile Privacy Disclosures, a recent report by the FTC staff on smartphone eprivacy