Wednesday, October 28, 2009

Transforming Values for an Alternative Destiny

Text for World Bank and IFC Plenary Address at:

infoDev Global Forum
Florianopolois, Brazil
October 27, 2009
Dr. David E. Martin
Executive Chairman, M•CAM Inc.

Honorable Governor Luiz Henrique da Silveira, Director Mohsen Khalil, Distinguished Guests, Ladies and Gentlemen,

We meet on this day in the land of the Tupi-Guarani to manifest transformations. At this Global Forum, we have assembled from every land not as explorers seeking conquest but as stewards of experience committed to building a more prosperous future for all. It is only fitting that we begin in this land of the mountain arising from the channel in the sea – the ancestral name for Florianopolis – with a moment of reflection for those whose feet have passed before us and who left the land beautiful for our enjoyment. Let us commit to leave this land, and all the lands from which we come, more beautiful than we found them for those who will follow us.

Today I would like to explore three transformations: Values, Resources, and Leadership and the role they play in our discussions here over the coming days. To do so, we must dedicate some time for honest assessment of where we are together with a consideration of our path to this moment. From that point, we can invite a dialogue about aspirations we have for the future. And finally, we can resolve to take the first step, enlivened and unfettered, into the future empowered by a vision which sees through obscurity into possibility.

What do we value? At conferences like this, it is often quite easy to begin with a series of unspoken assumptions – those untested, unspoken consensus beliefs to which all are presumed to assent. For example, we all assume that innovation is “good”. We are asked to believe that entrepreneurship is a modern ideal to which societies should strive. We are encouraged to hold as ideals the myths of the past 60 years of economic activity and all long for a “Silicon Valley” utopia in every corner of the globe. We are encouraged to speak of numbers and compare “ours” with “theirs” to see who is developed, who is developing, and who has the least. If it’s on a balance sheet, deposited in a bank, or traded on the stock market, it’s valuable. If it’s not, then we best ignore it. We agree, we presume, that it would be strange to speak of culture and indigenous wisdom and, instead speak of semi-conductors, nano-particles, and anti-retrovirals.

When did we lose our humanity? Let’s explore a couple of facts about values in the context of innovation.

Living systems have innovated as long as they’ve existed. And no, humans aren’t the only innovators. Ecosystems are filled with innovation. As trees’ roots respond to nutrients and water but grow to accommodate the pressures of wind and grade so to will the human seek to find sustenance and assurance. Unlike our ancestors, we often limit our use of the word innovation to things – usually things that require the non-replenishable consumption of natural resources, power, and labor – rather than seeing an ecosystem in which innovation has as much to do with how we do what we do as the artifacts we create. In our obsession with development, how many of us take the time to learn from the Heritable Knowledge of indigenous peoples who know how to use plants, soil, and water to live? How many of us have considered that we would benefit from innovation in enterprises and value exchange as much or more than developing the next ringtone on an iPhone?

Entrepreneurship should be encouraged, right? Well, maybe. How many of you remember that the modern corporation was established in Europe to shield individuals from personal responsibility. Would we really want to fly in an airplane built with limited liability wings? Would we want to drive a car with limited liability wheels? Yet we encourage our young entrepreneurs to participate in the prospective future employment for thousands on the foundation of limited liability. While we lament the breakdown of the markets over the past two years, have any of us considered that the very institutional foundations we seek to create – corporations – are expressly established to separate the person from the accountability of the venture?

Sixty years of success since the success of Silicon Valley. Really? Of course, you remember the World War II war reparations that lead to the birth of the computer and data industry now heralded as an American success. Magnetic tape, without which there would be no data storage industry, was created by Hitler’s Third Reich as a propaganda machine. Computers were created to decipher the codes of the Japanese and the Germans – codes that baffled the innovative minds of the U.S, the U.K., and Australia throughout the war. And the wealth of Silicon Valley half a century before came from Federal Government stimulus in the railroad industry and the banking sector – not from innovation. Without the Morrill Act for the railroads, there would be no Stanford University. We do no favors today by forgetting the truth of our past. Not a single element of what made Silicon Valley a success – preferential government procurement, national security technology transfer, trade incentives in the form of preferential tax concessions leading to effective anti-competitive pricing – would be legal today under WTO yet we see dozens of countries attempting to create that which didn’t actually happen.

Let’s visit the past to inform the present and future. Recall that the great trading empires which created the incumbent powers in the North were built on extractive trade. Sure, here in Brazil, coffee played a huge role with the Portuguese. However, the same drug trade which plagues our cities today was the currency of the empires just a century or two ago. Today’s cocaine is yesterday’s heroin. Today’s marijuana is yesterday’s opium. Friends, if the foundation of our markets was built on addictions and violence. Shouldn’t we consider transformation? Shouldn’t our conference be focused on a new morality rather than the next turn of the extractive wheel grinding up those who it leaves behind as consumables?

Today, we might reconsider values. How do we encourage creativity that rewards those who address society’s greatest challenges with prosperity and public confidence? Is it possible, in this conference, to commit to aligning our innovation impulse to meet and exceed Brazil’s visionary president’s call for rainforest preservation and carbon emission reduction? Can we see value in 8,200 cubic kilometers of fresh water in this great country and see this as a Commons Trust rather than an exploitable commodity? We can and we will transform values here today.

In his treatise on the economy, John Maynard Keynes codified a sense of resources that has enjoyed little re-examination until the present day. In Keynesian terms, Brazil is 90,000,000 laborer consumers, bauxite, gold, iron ore, manganese, nickel, phosphate, platinum, tin, uranium, petroleum, timber, coffee, grains, sugarcane, cocoa, citrus, and beef. Oh, and now, we need to be fashionable and throw in millions of hectares of carbon sequestration for the polluting world. How many of you would be happy to be told that your only worth on the planet was limited to the bank account you have, the car or bicycle you have, the number of employable children you have, and the house in which you live? That’s it. Nothing else counts!

Well, you are more than that. We are more than that. It is a tragedy that the last 80 years has reduced our mental capacity to see our land, our people, and our ecosystem for what others can take from it rather that for what it can generously provide.

My company, M•CAM, works with helping countries re-discover and reclaim their own story. In the wake of our discovery of the degree of abuse in the global market of carbon trading – including the growing use of carbon credits to launder drug money and finance terrorist organizations across the world – we decided to work with communities in Papua New Guinea to revalue their forests. Working with the Quachet in East New Britain province, I sat with elders and asked them what a rain tree was worth. They told me about the tree and its many functions. The rain tree supports hundreds of species of plants and animals in its expansive reach. Its bark, leaves and roots are filled with healing teas, pastes, and medicines. Its vast leafy canopy condenses rain from cloudless skies providing pure water to the land and life below. Its wood, when one of its limbs falls, is sufficient for several houses. So when I asked them if I could buy it for its carbon absorption, they laughed. “Why would you want only that from such a generous tree?” they asked.

Together, we worked to create the world’s first Heritable Innovation Trust – a new legal framework which renders obsolete the WIPO’s traditional knowledge paradigms. While here in Brazil and in many other parts of the world there is a growing sense of the need to “protect” indigenous or traditional knowledge, what local communities are not told is that by putting this knowledge into copyrighted form, they are really accelerating its loss into public domain. In 70 years, the information that is recorded by well meaning programs, like those here in Brazil working in Amazonia, will enter the public domain under industrial property laws in compliance with WTO’s TRIPS agreement. In the Heritable Innovation Trust, the community stewardship of community and ecosystem knowledge is placed in a perpetual Trust which can neither expire nor be taken by those who seek to exploit without community engagement.

Resources come in many untraditional forms and are often most prevalent where they’re least expected. Just a few months ago at the infoDev conference in Coimbatore India, many of you witnessed a commitment on behalf of my organization and infoDev – a commitment that is fully delivered today. For those of you who were not there, let me give you some background.

Since the modernization of the intellectual property system and sponsored research programs of the past four decades, economic development and exclusionary innovation property rights have gone hand-in-hand. However, as far back as 1980, these property systems were contaminated with a growing practice of using patents and other intellectual property regimes to block commercial access and market use. It is no accident that some of the largest patent estates were filed (and restrained from market adoption) by companies who had the most market share to lose. Oil companies filed and held thousands of environmentally desirable patents in fields ranging from solar and wind power to hydrogen and hybrid propulsion. Paint companies filed and held thousands of patents on alternative surface coating techniques only to continue using toxic metals in industrial production. Pharmaceutical companies and their agro-chemical allies filed and held thousands of patents on treatments and cures for disease and on land renewal technologies and insured that these options were not available for deployment. And the list goes on. However, in this “cold war” of innovation abuse, the most economically most marginalized states (a term we use in place of the conventional term “Least Developed Countries” or “LDCs”) were overlooked. Patents were not filed in markets that didn’t seem to matter. And this has created an unprecedented opportunity for bringing hope to us all.

Exemplified in the extreme in the area of climate-impacting energy and infrastructure technologies, an unhealthy alliance compounded the global failure to accept and adopt technologies which could have provided pre-crisis interventions in environmental technologies. Through infrastructure bond funding programs with their associated long maturities, economic incentives existed to blockade the acceptance and deployment of efficient – albeit obsolescing – technologies. After all, there was no effective way to install distributed power generation five years into a 30 year coal fired grid based electrical system. By funding things in extremely large, centralized scale, innovations that were made were not judged for their technical merit or feasibility but rather for their ability to be scaled into legacy inefficiencies. Compounding this economic impediment was the patenting practice, adopted by the majority of patent applicants throughout the 1980’s, called “defensive patents”. Defensive patents – representing an estimated 80% of all filings by industrialized nations – do not represent artifacts of innovation but rather utilities for litigation risk management. By extension then, when patents on litigation anticipation or financial obsolescing “innovations” were awarded, they not only precluded others from entering into research and development or market efforts, but they also froze much needed technology out of the market.

Out of this ill-conceived industrial policy emerges an unprecedented opportunity. Patents on environmentally necessary technologies born in the research and imaginations of energy shocks dating back to the 1970’s afford an amazing Global Innovation Commons which can serve to catalyze solutions for the climate crisis as well as the global economic disparities which have fueled acrimony between countries leading up to Copenhagen.

It is a violation of patent law to engage in “double patenting”. This practice is simply the seeking of a patent on something that someone else has already claimed. When Volkswagen received a patent for a hybrid electric vehicle that includes a rotating flywheel mass variably engaged by a series of clutches in 1979, their allowed claims are so broad as to describe virtually every hybrid electric vehicle built since. This patent expired in 2002 and is now in the public domain where anyone, anywhere, can practice every element of this invention without any fear of patent enforcement. That’s right, an automotive company in a marginalized country could use 100% of this information to design and build a car to compete with Toyota’s Prius. Today.

When policy-makers debate concepts like “compulsory licensing”, the problem is that they are masking a giant asset which exists disproportionately benefiting the Most Marginalized States (“MMS” or conventionally designated “Least Developed Countries”). They are attempting to reinforce, rather than reform, a patent system which has been failing all interests – including those in the industrialized nations.

In short, the perpetuation of the illusion that we still haven’t “innovated” enough has placed the challenge on the wrong dynamic. Over US$1.6 trillion in market innovation latency has been created over the past three decades alone which has been overlooked – not on its merit but rather on the fact that it would challenge incumbencies. Given the magnitude of the challenge before humanity, our clarion call is for the deployment and honoring of these innovation impulses which have been marginalized and the use thereof to seed enterprises in the Most Marginalized States.

Using a framework called the Global Innovation Commons, all innovation artifacts (patents, research publications, government or industry sponsored research reports, and technology procurement records) have been assembled and reviewed for their legal standing in every country on Earth. These innovation artifacts have been compiled so that jurisdictions of enforcement are easily assessed to avoid any infringement in any jurisdiction. This enables a business or government to know what can be developed for domestic use only, for limited export, or for general export. Wherever possible, using abandoned patents, global freedom-to-commercialize positions are identified for unrestricted commercial use and deployment.

At this conference, in a partnership between infoDev and M•CAM, you all will have access to almost $2 trillion dollars – more than the entire GDP of virtually all countries represented here today – of innovation waiting to be put into use. It represents the greatest assembly of innovation ever and it’s yours today! We have an opportunity to transform our view of resources to include a world of innovation which has been kept from deployment until today – a world of innovation that will lead to clean water, ethical health care, adequate food production and distribution, and renewable energy. And when we have ethical and open use of this innovation, we will be free to innovate exchanges of value which do not require wealth asymmetries which foster poverty, violence, and terror.

While conferences across the world lament the lack of financing for small and medium sized enterprises – they turn to venture capital as a solution. Why? Because that’s what the U.S. and Europe did, right? Did you know that here in Brazil and in most countries represented at this conference, the greatest available cash to start ventures is currently sitting, unused in the hands of your governments in the form of Trade Credit Offset obligations? You’ve probably never heard of these because you were being deafened by those who wanted to sell you inefficient equity models which have destroyed more enterprises then they’ve created.

When a government – like Brazil – purchases goods from a U.S. company, for example, a percentage of the value of the contract – often between 10 – 30% - is required to be “returned” to the country in the form of a Trade Credit Offset. The selling company may be required to set up a local manufacturing center for critical components. In the case of China, the company is required to transfer technology and training. In every instance, before the seller can book the revenue for their contract, they must reinvest in the country involved in the purchasing. So why, at a conference like this and at every innovation and entrepreneurship conference around the world, aren’t you being told to link your business incubators with your countries’ Trade Credit Offset managers? In a few cases, it’s because these offsets have become the source of corruption. But, in most cases, it’s simply because you didn’t know. Well, now you do.

Honorable delegates, what I’m really calling for is leadership. I would like us to invite a transformation of our view of leadership – away from the belief that the loudest voice with the largest crowd is leadership. In our CNN 24 hour flat-screen New York Stock Exchange view of the world, we’ve failed to realize that leadership comes from those who are worthy of being followed – not from those who demand attention and blind loyalty. In fact, the only place where leadership can emerge is from those who learn first to be good steward citizens. Our challenge here today and in the coming days is to evidence a humanity so inspiring that others will choose to follow.

When Professor Anil Gupta and Dr. R. A. Mashelkar and others in India chose to launch the National Innovation Foundation and other grassroots innovation initiatives, they embarked on a journey that was filled with challenges. In partnership with my organization and many others, we began working with grassroots communities – people in rural villages in India – to re-imagine a world where to be an innovator meant addressing real human needs. In its first year, only a few innovations gained a market however, in its second year, acknowledged by India’s President Abdul Kalam, over 2,500 innovations were serving as the basis for prosperous engagement across India. Mind you, many of the markets were not based on the exchange of money. Many of the grassroots innovators actually gave and received goods and services in exchanges ranging from barter to complex utility derivatives. In some instances, the value that was bestowed upon the innovator was a garland of flowers placed around the neck of the distinguished person by India’s President. While this is not “money” in your traditional sense, in many communities throughout India, honor from the President is a social value money could never buy and lasts far longer than a few thousand rupees.

When we work with small and medium sized enterprises in South Africa, the Kingdom of Tonga, or Chile, our goal has always been to look at a practical way to transform the past models into a prosperous future. I would encourage you to consider the following as a process to employ.

First, honor and value the innovator. Every person who has an impulse to change his or her life or those in the community should be honored. However, this does not mean that they must be pushed into a company. To the contrary, we need to transform the incorporation of a company into the incorporation of an innovator into the global community of like-minded innovators. When we see innovation as the inclusion into a community of creative people rather than an isolated event to isolate a hero, we will transform innovation.

Second, honor and value the community. In every innovation, many creative minds have come before and every one of their contributions must be included in the next step being taken. By using models which reward collaboration rather than proprietary isolation, we create value that impacts the lives and livelihoods of many rather than the wealth of a few.

Finally, reward that which replenishes rather than extracts and destroys. For too long, we have been told that we are a sum of our extractive parts. I am delighted to be here in Brazil – a country which spends 30% more of its GDP on education than on the military – discussing the transformation of value. While this government has served as a beacon for many others in calling for a “sustainable” future, I’m encouraging you today to innovate that vision. Take the next step and be the first country on Earth where we see consumption as one element of an economic cycle but where we also see stewardship and citizenship a value which is cherished in tangible and intangible ways. Transform the impulse to protect from outside abuse to a motivation to celebrate a Common heritage and destiny in which innovation serves to integrate a better future rather than isolate an unfortunate few. Today, let us all commit ourselves to a Common Future built on Transparency, Accountability, and Citizenship.

Dr. David E. Martin
Executive Chairman, M•CAM Inc
210 Ridge McIntire Road
Charlottesville, VA 22903

Batten Fellow, Darden Graduate School of Business Administration,
University of Viriginia

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Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave