Author: Deven Desai

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Will The Disruptors Be the New Dominants?: On Uber, AirBnB, and other seeming upstarts

Loving your online, decentralized model may not work when you care about safe drivers, clean rooms, and other real-world issues. Claire Cain Miller brings up this problem in today’s New York Times. She points out that AirBnB and Uber are trying to follow “a religion [from] Silicon Valley: Serve as a middleman, employ as few people as possible and automate everything. Those tenets have worked wonders on the web at companies like Google and Twitter. But as the new, on-demand companies are learning, they are not necessarily compatible with the real world.” I agree. In The New Steam: On Digitization, Decentralization, and Disruption, I point out that “transactions costs related to safety, quality, property rights, contracting, and knowledge may be more acute in a digitized, decentralized world.” Ms. Cain Miller (apologies if Miller is the preferred last name), hits on some great points about the differences between the types of harms in the online and offline world. As she looks at it, the lack of humans is a problem for the reality of the services and relates to politics: “The belief that problems can be solved without involving people is probably why many of these companies did not meet with regulators and officials before starting services in new cities.” I think there is something more going on here.

Yes, the big firms in the space will engage in lobbying, but part of their story (and practice) will have to be about how they meet the issues of labor, safety, and more that they affect. As I put it:

[E]ven with digitization, economic questions will remain, but we must understand what they are and why they persist to see what the future may be. Douglass North captures a paradox that goes with transaction costs. Greater specialization, division of labor, and a large market increase transaction costs, because the shift to impersonal transactions demands higher costs to: 1)measure the valuable dimensions of a good or service; 2) protect individual property rights; 3)enforce agreements; and 4)integrate the dispersed knowledge of society.26 Standardized weights and measures, effective laws and enforcement, and institutions and organizations that integrate knowledge emerge, but the “dramatic increase in the overall costs of transacting” is “more than offset by dramatic decreases in production costs.” Digitization forces us to revisit these issues. With digitization, we are seeing an abundance of person-to-person transactions, but with the problems of impersonal transactions.

In simplest terms, AirBnB , Uber, et al. may face some rocky times, but there is a good chance they will figure out how to address the current issues and end up being the dominant firm, not the small disruptor. As Ms. Cain Miller notes, AirBnB has added hotlines and insurance. Uber has also increased its insurance requirements. If the disruptors continue to address a decent amount of the issues North calls out, my bet is that “this era of disruption and decentralization will likely pass and new winners, who will look much like firms of old, will emerge, if they have not already.”

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Makeup as the Killer App for 3D Printing?

A woman named Grace Choi seems to have come up with a way to 3D print “lipstick, lip gloss, eye shadow, blush, nail polish, brow powder—pretty much everything except foundations and face power” at home. Her company, Mink, uses FDA approved inks (vegetable or edible). The goal is that a consumer could take a picture or using an online image of the makeup, the software would match the color and print out just enough makeup for that application. If the prototype holds up, this product could be one to bring 3D printers into many homes. But is it the killer app for all of 3D printing?

Put differently, a fair question that comes up when I talk about 3D printing is will it really be a device in every home? The answer depends on what one means by the question. First, at this point, you need a different 3D printer for different outputs (e.g., makeup or something in plastic as opposed to metal or ceramic). If Mink takes off, yes, a type of 3D printer could be in many, if not a majority, of homes. But as Gerard, others, and I have said, this device is not a replicator. So until a 3D printer is able to have multiple mediums in one printer, the spread of the devices will probably vary depending on the medium of the output. As such the killer apps for each medium will be specific to the device. That said, Mink may have a larger importance for 3D printing and home technology.

Mink could be a sign of where home inventors and makers are headed. Ms. Choi hit on her idea and took about a month to work through 20 printer prototypes, sort the ink issues, and have her working Mink printer. Granted she is a Harvard MBA and apparently has family support, but her approach could lead to new players in her field and others. As reported by CNBC, Ms. Choi, “Much of the make-up sold by high-end labels starts with the same base substrates, or ingredients, as cheaper ones.” This point is part of what motivated Patents Meet Napster. The core things needed to make many products are easier and easier for anyone to obtain. If Mink is priced at $300 to start as promised, that price will likely drop over time. If women adopt the technology and then tinker with it to improve on the hardware or the design colors, they may be inspired to launch their own companies and tinker with other technologies to get there. Like car and computer enthusiasts, cosmetic enthusiasts may find that playing with making what they want and love can lead to new products and businesses. And if that happens at scale in one sector, it may spur adoption in others. So maybe 3D printed makeup is not a pure killer app for 3D printing, but maybe it does not have to be to still have some great effects.

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Another in the Stop, Be A Better Lawyer Posts

With all the focus on law in alleged decline, and the ease with which we can put our heads deep into a subject, too much can pass by. That is why on occasion I post about meteor showers, eclipses, and other wondrous fun. Fun can die. Wonder can fade. When I taught professional responsibility, I always tried to remind students that the profession can be tough (just look at substance abuse and divorce rates for lawyers), but that they should try to find part of the law that excited them. One had to know that even then the fight is long and difficult, but if you love the work, much of the burden is reduced. If you are lucky, you may be able to have the joy that these science folks share in the video below. And if the career is not giving you a way to find the wonder, find it elsewhere. That too can lift you up, and you will be a better lawyer. Yes, empathy matters, and I think it grows when we remember that are humans running through life trying to make things work and maybe a bit better too.

So I give you this video. I hope deGrasse Tyson is correct that we are all connected by logic. But even if he is incorrect, as Guru Sagan says, “The beauty of a living thing is not the atoms that go into it, but the way those atoms are put together.” Enjoy.

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CUT THE CORD!! HBO without Cable

O frabjous day! Callooh! Callay! It is about time! HBO has announced it will offer a streaming service in 2015. Earlier claims about the need for cable to market and to work with the cable industry seem to have fallen away. The claim is that there are 80 million homes that do not have HBO, and HBO wants to fix that. Can you say Netflix? Netflix subscriber numbers were flat today. Still, if HBO goes over the wall, I imagine that Showtime and others will too. So I may just succeed in cutting the cable. Atlanta has decent digital signals (though there should be more). The most interesting thing to watch: ESPN’s next move. It has a hold on cable a Brazilian jiujitsu master would respect. But if ESPN decides to go with a direct pay model, it could pick up many new viewers, especially the ones who are used to watching the special college version of ESPN they have for free while at some schools.

These markets may also be quite different. Some may prefer the ease of watching the pre-programed madness that is cable. Heck, if I am channel surfing and see that Ocean’s Eleven is on TNT, I will watch with commercials even though I own the blasted DVD. Oh yes, laugh. Because you know that you do it too. May not be Ocean’s but fill in the blank with Bridget Jones or whatever floats your boat; there is something oddly comforting or easy about finding a program in a guide and selecting it. It seems like a low-grade information overload problem. Rather than reaching for the DVD or searching Netflix or Amazon, having someone else narrow the options tips us into odd choices like watching that same movie for the umpteenth time with God help me commercials!

In any event, I hope the HBO experiment works. I know unbundling may threaten many offerings. But the current costs of cable are absurd and the best content is on just a few channels. I don’t think the new golden age of T.V. will suffer in this new world. It could grow as more people are reached with niche shows (that is how I see things like Breaking Bad and other winners that don’t need huge viewership to succeed). Subscriber shows should be a real thing soon. As I said before, Firefly could have been saved today, because enough viewers would likely have fronted the costs to get a 10-13 episode season. Add in many have the patience to just buy the series and binge, or stream on Netflix or Amazon or HBO, and maybe shorting cable companies is smart.

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3D Printed Cars: The Model T Redux?

3D printed cars were a growing possibility while I researched Patents, Meet Napster: 3D Printing and the Digitization of Things. Now a company discussed in the article, Local Motors, has exceeded expectations in a wonderful way. It has produced a 3D printed car in a total of five days. The car, called the Strati, weighs about 2,200 pounds and can go about forty miles per hour. The expected retail price is $20,000. Now that seems less cool. But here is the really good stuff.

The design time and total number of parts is super low. Apparently, the design started in May and was complete four months later. Total number of parts 49 compared to 5,000 for a standard car. As one of the engineers, James Earl, put it in the article: “The thing that this lends most to is customisation-ality, [sic] so you can get a car that really suits your needs with very little monetary input from the design side.” These facts, if they hold up, are why car makers, or at least auto-parts suppliers may be excited or scared out of their minds.

We now have customized cars, with few parts, at a low cost. Let’s assume the cost could go down if the company scales up. Let’s also assume that some of these techniques are incorporated into other auto-maker’s manufacturing. The vast array of auto-suppliers that were in deep trouble when Detroit took a dive could soon be unnecessary. That network of industries Detroit supports could shrink and, in essence, vanish. At the same time, if India’s Tata Corporation, which aims to make low-cost cars for the growing middle class in India, jumps in, Local Motors could find a partner with cash to go big with its technology. High-end makers may allow for bespoke BMWs or Jaguars. Really tall or short people could have cars custom-built to their height and sight lines. Then again, Google may want the tech for its golf cart-like self-driving cars. Lots of possibilities, yes? That’s the point. Something amazing is bubbling up and fast. Which brings me to another point.

Sometimes when I presented the paper, there’d the law professor response of “I just don’t think the tech is there yet.” That view missed what motivated the paper. For once, I wanted to be ahead of the curve on law and technology. Being at Google solidified my view that one can assume the tech will come. “Whether 3D printing will realize all the dreams it currently inspires is not the question” is part of how the article engaged with this point. Local Motors and cars. 3D printed guns. The dreams or nightmares are coming true. Expect some incumbents to fight, some to fear monger, and some to embrace the change. As I offer in The New Steam: On Digitization, Decentralization, and Disruption “this era of disruption and decentralization will likely pass and new winners, who will look much like firms of old, will emerge, if they have not already.” For now, the car-world could be plunging into the disruption and decentralization phase. As Local Motors and others ramp up their factories and break through the regulatory issues, new players may find it harder to play. Until then, let the games begin!

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Process Matters: How, Corporate Reputation, and the Trademark Game

The New York Times reported about the fight over trademark rights around the word “How” and there was the usual chatter about how (yes very punny we law professors are) such a thing could be. But for me the more interesting point was that the issue of how something is made continues to rise as a market question. The dispute is between Chobani, which is pitching us ““A cup of yogurt won’t change the world, but how we make it might,” and that “How Matters,” and Dov Seidman whose company “is in the business of helping companies create more ethical cultures” and whose book is “How: Why How We Do Anything Means Everything.” As I argue in Speech, Citizenry, and the Market: A Corporate Public Figure Doctrine:

Corporations no longer exist in a purely commercial world. Corporate policies intersect with and shape a host of political issues, from fair trade to gay rights to organic farming to children’s development to gender bias to labor and more. Thus Google urges countries to embrace gay rights; Mattel launches a girl power campaign; activists question Nike’s labor practices, McDonald’s food processing, and Shell Oil’s business practices; and bloggers police the Body Shop’s claims about its manufacturing practices. The social, political, and commercial have converged, and corporate reputations rest on social and political matters as much as, if not more than, commercial matters.

The How of Seidman and Chobani is not limited to those companies. McDonald’s is now trying to engage with its customers about, yes, how, they make their food. I suppose using social media and the former Myth Buster Grant Imahara to reach young ‘uns is wise (then again if the goal is to reach Millenials as reported, they might see this tactic as a ploy). Regardless of success or failure, McDonald’s is another sign that Douglas Kysar’s Preferences for Processes: The Process/Product Distinction and the Regulation of Consumer Choice insight that process matters to the marketplace have force. As he put it “Because process preferences provide an outlet for the expression of public values through a market medium that is being endorsed simultaneously as a primary locus of choice, opportunity, and responsibility, individuals may well come to view such preferences as their most appropriate mechanism for influencing the policies and conditions of a globalized world.”

To date, activism over how has not seemed to gain major traction, if one looks to things such as labor and clothing or environmental issues in energy. Price still matters. Giving up our easier way of life (yes first world ACH! such a condescending term, high quality problem) to improve lives all over the world and for future generations is easier said than done. Try to buy clothing and food that is truly perfect (whatever that metric is, let’s assume fair labor and environmentally sound). Some sort of quasi-subsistence/commune hybrid life would be required and is not viable across society. Yet, as people speak up, and companies engage, make claims about their roles in addressing social matters, and adjust offerings (e.g. offering fruit in kids’ meals or refusing to sell cigarettes in a pharmacy), it may be that long term, incremental changes will emerge. When folks indicate preferences, options to buy something a little bit healthier or fairer could come on to the market. We might buy fewer things but buy better things. And another signal is sent so that the cycle might persist.

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The Future, Heaven, and Limbo Have Been and Will Always Be Apple Stores

If you saw Sleeper, Heaven Can Wait, or the last of the Harry Potter films, you might notice that they all have scenes that look quite like an Apple Store. White, seemingly floating desks, some robots, a sense of what it is all about. The likely reason is the design gurus of the 1970s like the stark white, sharp lines look. Steve Jobs was a student of that era and it informed Apple, The Sequel from iPods to the stores (the first Apple movie was design tools, the second was “we design, you buy”). As for Harry Potter, why fight the future and the masters? Tap into that vibe and viewers will be happy to know that even limbo, afterlife (whatever that was) is much as it has always been. White, simple, soothing, yet confusing too.

I wonder whether the Chinese group that copied the Apple Store perfectly could argue that the trade dress was generic?

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3D Printing and Quality Ears. Ears? Expensive Monitors Really

It turns out that musicians wear customized earpieces called monitors to hear the music they make at a concert and to protect their ears from the speakers. A company called Ultimate Ears Pro is in this line of business and uses 3D printing for its next step in creating the devices. As Digital Trends explains the shift is not lowering cost but is increasing the quality:

“Bringing this process in required a tremendous investment in capital, time, resources and training.” Dias explains, which is why 3D printing hasn’t lowered the price points for the devices, as we had imagined. In fact, the company apparently had to take a hit just to keep the pricing the same. Apart from throwing down a hefty load for equipment and software, all of the craftsman who had been working with UE Pro’s in-ear monitors in the traditional method had to completely relearn their craft to work with the new 3D printing technology. As difficult as the process was, the company believes it was necessary to create a revolution in “speed, fit, quality, and comfort” for UE Pro’s monitors.

The company has been mainly serving professional musicians, but is now reaching music lovers too. UEP started from work for Van Halen’s drummer and then its opening act at the time, Skid Row. The desire to keep the quality up is where 3D printing comes in. The turn around time is abut half but given the customer-base, professionals and upscale music lovers, the quality improvement. As Ryan Waniata put it in his article, designers “can be more brazen with their sculpting, allowing them to create a fit for each user that is virtually perfect. And when it comes to in-ears, it’s all about the fit.”

The process still require several other steps including taking a mold of your ear. But the head of UPE mentioned something Gerard and I discussed in Patents, Meet Napster: 3D Printing and the Digitization of Things. Scanners may soon allow someone to get a scan at a store or make the scan themselves.

It’s not magic, but each step may move us to a world of bespoke earpieces for almost everyone. An upgrade for an iPhone or Samsung phone may be supercool headphones, customized and as good as rock stars, which, after all, is what Apple claims we can all be, at least in our heads.

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There She Is, Your Homemade AR-15

I cannot give a talk about 3D printing without addressing the question of homemade guns. As Gerard and I pointed out in Patents, Meet Napster: 3D Printing and the Digitization of Things, this is America and making guns at home is legal. The issues many faced was whether the gun would work well, fail, or possibly misfire and harm the user. These issues are important as we look at the shifts in manufacturing. Many of us may prefer authorized, branded files and materials for home made goods or prefer to order from a third party that certifies the goods. That said, some gun folks and hobbyists are different. They want to make things at home, because they can. And now, Defense Distributed has made the “Ghost Gunner” “a small CNC milling machine that costs a mere $1200 and is capable of spitting out an aluminum lower receiver for an AR-15 rifle.” That lower is the part the the Federal government regulates.

Accoridng to Extreme Tech, Defense Distributed’s founder Cody Wilson, thinks that “Allowing everyone to create an assault rifle with a few clicks is his way of showing that technology can always evade regulation and render the state obsolete. If a few people are shot by ghost guns, that’s just the price we have to pay for freedom, according to Wilson.” This position is what most folks want to debate. But Gerard and I think something else is revealed here. As ExtremeTech puts it, “This is an entirely new era in the manufacturing of real world objects, in both plastic and metal. It used to be that you needed training as a gunsmith to make your own firearm, but that’s no longer the case.” That point is what motivated me to write about 3D printing and look deeper at digitization and disruption.

The first, short, follow-up on these ideas is in an essay called The New Steam: On Digitization, Decentralization, and Disruption that appeared in Hastings Law Journal this past summer.

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Sports, Player Protection, and of course, Money

The attention to the way football head injuries affect players at all levels of the game is good. Whether the game as it is loved today can persist, I leave to others. But as the NFL has asserted that it wants to protect its players, the question of injury and health beyond head injuries struck me as a good one. I love football. I grew up with hard-nosed, crazy players (Raiders fan even during the abysmal last twenty plus years of dubious management). But with the evidence that these Sunday circuses put players at so much risk, I hope that the league and fans can find ways to mitigate the long-term harms of the sport. As Arian Foster recently pointed out, Thursday night games are not geared to protect players. Quite the opposite. They generate large revenue and are not going away. Yet it seems that a solution is at hand.

Use the bye-week teams to play on Thursday nights. With some juggling, the teams could be set up so that if a team is on a bye week, they play on Thursday, and then they again would have nine days rest. That should make for fewer injuries overall and a better post-season. Others may have written about this option (and a good friend had made this argument in the past but not to me). There may be fewer Thursday night games. But smart folks at the NFL should be able to figure out how to maximize the games, while still making money for the league and the players. Some may ask whether all long-term injuries can be mitigated. I doubt that. Still, if lawsuits persist, football, soccer (more contact and head injuries than one might think), and many contact sports may have to shift their rules or find that they can’t attract the best athletes. Hmm a world of basketball, extreme sports, and curling. Maybe I could get into that.