Intellectual Property: One Of The Best Ways To Get Rich

“Creativity is knowing how to hide your sources” ― C.E.M. Joad

MENTAL MODEL

bicycle beside wall
bicycle beside wall

Intellectual property encompasses creations of human intellect. There are countless types: patents, copyrights, trademarks, and trade secrets. Simply put, what you create using your brains is legally protected as an intellectual good. The law also extends to things like trademarks and patents where you forbid others from making use of your ideas or charge a fee for doing so. The concept is meant to stimulate innovation by pushing people to contribute to technological progress via the incentive of then being able to sell these ideas for a profit.

One of the best things about intellectual property is that it cannot be consumed. It is never depleted. A billion people can buy a copy of a particular book and read it, and the author only had to write the book once. Industrial intellectual property is slightly different. Take the patent for instance. Its a form of right granted by the government to an inventor. The owner then has the right to keep others from making, using, selling, offering, and importing an invention for a period of time. To be patented, an invention has to be (1) new, (2) not obvious, and (3) industrially applicable. Under the same umbrella are trade secrets: formulae, practices, processes, instruments, or patterns which are not generally known. Think: Coca-Cola’s drink formulas and KFC’s chicken recipes.

The idea of intellectual property is to encourage people to create. Because they can profit from the intellectual goods they create, this acts as an economic incentive. Everybody wins. Technology is advanced, and the inventor earns a living. Industries such as software, pharmaceuticals, and entertainment rely heavily on intellectual property to survive and thrive. Imagine how different the economy would be if you couldn’t secure your brand, painting, or book. Anyone could open a McDonald’s restaurant. Artists wouldn’t be able to sell anything, since copies and originals would be equals.

It’s worth noting that intellectual property is one of the most robust levers an individual can pull within an economy. By creating something like a course, book, lecture, painting, or software, you can both (a) position yourself as an industry expert and (b) sell the item indefinitely. This is why countless business books parrot the notion that to get wealthy you have to concentrate on assets. One of the many ways to accumulate assets is to create them in the form intellectual property. What you build lasts. Whereas empty work that leaves no substance behind just evaporates.

flat view of cameras beside computer tablet and smartphone
flat view of cameras beside computer tablet and smartphone

Real-world examples of intellectual property:

  • Technology and Software: companies like Microsoft and Apple leverage patents and copyrights to protect their operating systems and software products. This protection incentivizes the incredible research and development investments required to develop cutting-edge tech. Only with these rights can companies recoup their investments and sustain innovation. Though they also spark debates over software patents and open-source alternatives.

  • Pharmaceutical Industry: pharmaceutical companies secure patents for new drugs. They are granted exclusive rights to manufacture and sell the medication for a set period. This exclusivity is why drug development gets such significant investment. Though it results in high prices and limited access until generics are allowed post-patent expiry.

  • Entertainment and Media: Hollywood studios protect films via copyrights. This is why you cannot reproduce and distribute what you see in the cinema. The system allows studios to invest in their high-budget productions. But it raises issues over what fair use is. Oh, and people start going “Argh!” as they pirate their movies online.

  • Fashion and Branding: luxury brands like Gucci and Louis Vuitton use trademarks for their logos and designs. Trademarks maintain brand identity and customer trust. Yet you still won’t pass one market in China or Turkey without a “Louis Louis” handbag or “On White” t-shirt. Counterfeiting is a problem.

  • Academic Innovations: universities often patent scientific discoveries which are then licensed to companies for commercialization. This transfer of technology from research institutions to industry fuels the economy. It also pays the hard-working researchers.

How you might use intellectual property as a mental model: (1) value the untouchable — recognize how significant intellectual property is in the modern economy, and perhaps start assembling your portfolio; (2) protect don’t hide — ensure that while you protect your brainchildren, you also share and disseminate your ideas to spur further innovation; (3) make innovation a priority — use intellectual property as a basis for investing decisions, allocating part of your business resources to developing, protecting, and managing your intellectual property; (4) start building — always aim to be creating something, such as writing a page every day for a book or contributing to your photography portfolio, and share your work, as this expands your luck surface area.