Saturday, October 08, 2005

One nation, under mastication.

Qatnappers - Djibouti

403 words
8 October 2005
The Economist
ECN
377
English
(c) The Economist Newspaper Limited, London 2005. All rights reserved

The effects of the drug qat in Djibouti

Try doing business without Djibouti's favourite drug getting in your way

MOST of Djibouti's men (and some women) spend their afternoons at home, in the streets or on the floor of their government offices, chewing fresh leaves and tender shoots of the plant, holding the mastication in their cheeks like golf balls, for hours on end. After midday, when the daily qat plane flies in from Ethiopia and Djiboutians start queueing to buy their fix, serious business meetings become impossible.

Chewing qat gives a similar high to adrenalin, making the consumer more talkative, alert and sociable. It also reduces the appetite. Long-distance lorry drivers, shepherds and guards have long used the leafy shrub to help them in their work—but be wary of the driver with that bulge in his cheek. That first effect eventually wears off, and the users become lethargic. Central Djibouti, in the afternoon, is a ghost town, gently decaying in the heat and dust.

Qat's drawbacks are many. Try finding a place to live: if the potential landlord is a regular chewer, all promises to clean the flat, install air-conditioning or even provide some simple furniture will probably come to nought. Residents of the tiny country, wedged between Ethiopia, Eritrea and Somalia, on the Red Sea coast, recall with a smile a short recent episode when the qat supply was interrupted. By the time the stuff was properly out of their system and the men had decided energetically to repaint their homes, supply was resumed and their ambitious plans were promptly shelved.

Still, qat can also oil the wheels of Djibouti's business. If you can stand its insipid taste and the ensuing thirst, chewing it with colleagues is a good way to bond, though it is mildly addictive and the long-term consequences may include heart disease, anxiety or even paranoia. On the plus side, some British researchers say it may increase male fertility, though it can also (Djibouti males deny this) destroy the male libido.

Djibouti's government is easy-going, with tales of bulging cheeks in the presidential garden. More tellingly, the distribution of qat is the economy's most efficient part. Small boats rush the stuff to towns at the other end of the coast. Other supplies, such as food and clothing, take the slow boat twice a week.

Geeks and guts.

Memo to Economist: protuberant abdomens and technical proficiency are found together more often than not.

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The life and soul of the internet party - Face value

1,049 words
8 October 2005
The Economist
ECN
377
English
(c) The Economist Newspaper Limited, London 2005. All rights reserved

David Sifry, the founder of Technorati, is betting on a change in the nature of the internet

DAVID SIFRY'S epiphany occurred when he read “The Cluetrain Manifesto”, a book published in 2000 that quickly became a bible in certain Silicon Valley subcultures. Its main thesis is that “markets are conversations” among humans who use language that is “natural, open, honest, direct, funny and often shocking” and above all “unmistakably genuine”, whereas companies and governments are stuck in “the humourless monotone of the mission statement, marketing brochure, and your-call-is-important-to-us busy signal.” But liberation is at hand. The internet, by amplifying the genuine conversations, will make a laughing stock of all those using the monotone.

The manifesto struck a particular chord with Mr Sifry, as he pondered the shortcomings of his then passion—an electronic mailing list that he was sending around, tailored to ultra-geeks. “Mailing lists suck,” he says, with the benefit of hindsight. They don't let the sender or the readers see what is being said about them; they provide no window into the conversations that follow. Then, in 2002, Mr Sifry discovered the then-new medium of blogs—personal online journals, linked to other blogs and information on the internet. He dumped his e-mail list and started blogging. But he was frustrated because the most popular internet search engine, Google, was no help, when he “wanted to find out who was linking to me.” So he started a new company.

Technorati is a pioneering search engine for blogs, which allows the surfer to connect to online chatter on topics that might interest him—top topics this week, included Harriet Miers and Ajax football club. Like all search engines, Technorati makes money by selling little text advertisements next to the results of relevant searches. But, as Mr Sifry sees it, his firm is much more than a new sort of search engine—it is an expression of a change in the sociology of the internet. Most people have over the past decade learned to think of the world wide web as a gigantic sort of library, with “pages” and “directories”. This explains the dominance of Google and Yahoo!, which have become the world's preferred librarians. In fact, both are making this role increasingly explicit. This week, Yahoo! joined several universities and archives to begin digitising old books in (physical) libraries so that they can be searched online. Google has similar plans.

As librarians, Mr Sifry acknowledges, Google and Yahoo! are “brilliant”—he has no intention whatsoever of competing with them in general web search. His idea for Technorati is subtly different, but has huge implications. Mr Sifry starts out with a metaphor for the web not as a library but—slipping into some technical argot common in Silicon Valley —“a big-ass threaded conversation”. Or, more poetically, a “river of human chatter”, constantly joined by other creeks and brooks and ever flowing. And whereas a library is by tradition a place where people whisper, Mr Sifry's internet is a cheerfully noisy place.

Technorati is therefore very different from ordinary search engines. Google and Yahoo! operate by “crawling” as many web pages as possible, making copies and putting them into an index, scoring and ranking them, and finally pushing them to web surfers who have typed search keywords into their browser window. Because of the time this takes, any snapshot of the web available through these search engines is between one and two weeks old—hopelessly late in the context of ongoing conversations. Technorati, however, does not crawl blog pages but listens for notifications—“pings”, in the jargon—from the blogs whenever they are updated. This means that Technorati's window into the subculture of blogging is only seconds or, at worst, minutes out of date. Technorati currently tracks about 19m blogs in this way, with an average of ten new “posts” (ie, updates) and one entirely new blog added, every second.

Mr Sifry's web-as-conversation metaphor is no longer eccentric. In fact, it is receiving the sincerest form of flattery (imitation) from the big librarians. In September, Google also unveiled a search engine for blogs (to decidedly mixed reviews), and Yahoo! is poised to launch its own. Mr Sifry says he is unintimidated by the arrival of these giant competitors. “Architecture follows from metaphor,” he proclaims grandly, and Google and Yahoo! just started out with the wrong metaphor. Tracking the web's conversations has only so much to do with algorithms, which is Google's prowess, and more with sociological insight—who responds to which blog, who recommends or snubs whom.

This, in fact, is what may give Mr Sifry a competitive advantage. He is that very rare thing, a geek who can use his right brain (social interaction), in addition to his left (computer code). On the left side, his geek credentials are impeccable. He has a degree in computer science and has been founding start-ups in Silicon Valley for a decade, dealing mostly with such nerdy obsessions as open-source software and radio-spectrum allocation. But rather than sporting a pocket protector and buck teeth, Mr Sifry has hints of a beer gut. While getting that computer degree, he boasts that he was “on and off academic probation” because he “always partied”. After college, he somehow found himself as the only gaijin in a Mitsubishi Electric factory in Japan. His speech is amiable Californian, peppered with “fucking” this and “fucking” that, in the excited tone of those surfing the nearby beaches, rather than the internet.

Mr Sifry has reason to be excited. Technorati's popularity is growing, as more and more bloggers get hooked on following the trail of their own conversations. Rivals are popping up with colourful names—IceRocket, DayPop, Bloglines—while Google and Yahoo! work on not being left out. Like everyone in Silicon Valley, Mr Sifry grows suddenly discreet when asked whether he would consider selling to one of them if the price were right. He may or may not. But whether or not Technorati will become the Google of the web's post-librarian era, Mr Sifry can at least rightfully claim that he started that particular conversation.

And people there like wearing them, too.

Looking east - Designer glasses

591 words
8 October 2005
The Economist
ECN
377
English

(c) The Economist Newspaper Limited, London 2005. All rights reserved

An Italian success story

“ABOUT 90% of the Chinese population is myopic,” points out Andrea Guerra, chief executive of Luxottica, the world's biggest maker of shades and prescription glasses. Chinese short-sightedness is one reason for Luxottica's second takeover in China since 2003. On October 4th, the company announced the acquisition for about euro30m ($35.7m) of Ming Long Optical, the largest optical chain in Guangdong, in southern China. Adding to the company's presence in Beijing and Hong Kong, it will make Luxottica the leading high-end eyewear retailer in China.

At a time when many obituaries are being written for corporate Italy—as the country's firms struggle to cope with low-cost competition from Asia—Luxottica is one Italian company that is thriving in the global marketplace. Last year, the firm had total global sales of euro3.2 billion. Because it specialises in high-margin goods, with an emphasis on craftsmanship and design, it still manufactures 85% of its production in Italy. But less than 5% of its sales are at home. The backbone of Luxottica's business is its own brands: Ray-Ban sunglasses, acquired in 1999, account for some 15% of the group's sales. But it also produces under license for Chanel, Prada, Bulgari and other luxury-goods firms.

Since the firm was founded by Leonardo Del Vecchio in 1961 in Belluno, a province in the north of Italy, it has thrived through mainly American takeovers. In 1990 Mr Del Vecchio listed his firm on the New York Stock Exchange. Five years later he branched into retail with the takeover of LensCrafters, the biggest optical retailer in America. This was followed in 2001 by the acquisition of Sunglass Hut, the world's leading retailer of sunglasses. Last year Luxottica took over Cole National, another big American retailer.

The integration of retail and manufacturing was a revolution in the industry, says Davide Vimercati at Kepler Equities in Milan. Today, retail generates more than two-thirds of Luxottica's revenue. Its retail arm is also the big difference between Luxottica and its archrival Safilo, another maker of sun and prescription glasses based in the north of Italy. The two firms are roughly equal in size in manufacturing, but Safilo's 50 shops pale in comparison with Luxottica's nearly 5,500 retail outlets, the vast majority of them in America.

China is Luxottica's next big challenge—a move that should expand sales, while lessening its dependence on America. Mr Guerra wants to conquer as much as possible of the “premium” segment, the market for glasses that cost $50 and more. This is ten times more lucrative than the trade in cheaper specs. Flavio Cereda, an analyst at Merrill Lynch, thinks that in a few years time Luxottica will double the number of its shops in China to 500.

Next year Luxottica's all-Italian 12-member board will probably become more international when some members' terms expire. The modernisation of the group began when Enrico Cavatorta, the chief financial officer, and Mr Guerra joined in 2002 and 2004 respectively. Until then Mr Del Vecchio ran the company pretty much single-handedly. Today, Luxottica's founder, who is 70 years old, has no operational role as chairman, although as owner of 70% of the company's stock he remains very involved. None of his four children works for the company. Managing his succession will be the last step in the transformation of an Italian family company into a true multinational.

Friday, October 07, 2005

Don't Forget About The Old Economy.

The Truck Driver Who Reinvented Shipping

HBSWK Pub. Date: Oct 3, 2005

Malcolm P. McLean (1914-2001) hit on an idea to dramatically reduce labor and dock servicing time. An excerpt from In Their Time: The Greatest Business Leaders of the Twentieth Century by Harvard Business School's Anthony J. Mayo and Nitin Nohria.

by Anthony J. Mayo and Nitin Nohria

Malcolm P. McLean, a truck driver, fundamentally transformed the centuries-old shipping industry, an industry that had long decided that it had no incentive to change. By developing the first safe, reliable, and cost effective approach to transporting containerized cargo, McLean made a contribution to maritime trade so phenomenal that he has been compared to the father of the steam engine, Robert Fulton.

Malcolm P. McLean (1914–2001), SeaLand Service, Incorporated

As a youth growing up on a farm in a small town of Maxton, North Carolina, McLean learned early on about the value of hard work and determination: His father was a farmer who also worked as a mail carrier to supplement the family's income. Even so, when young Malcolm graduated from high school in 1931, the country was in the midst of the Depression and further schooling was simply not an option. Pumping gas at a service station near his hometown, McLean saved enough money by 1934 to buy a second-hand truck for $120. This purchase set McLean on his lifelong career in the transportation industry.

McLean soon began hauling dirt, produce, and other odds and ends for the farming community in Maxton, where reliable transportation was hardly commonplace. Eventually, he purchased five additional trucks and hired a team of drivers, a move that enabled him to get off the road and look for new customers. For the next two years, his business thrived, but when poor economic conditions forced many of his newly won customers to withdraw their contracts, McLean scaled down his operation and got behind the wheel again.

Not just one trailer, or two of them, or five, or a dozen, but hundreds, on one ship.

During this setback in his life, when he almost lost his business, McLean came across the idea that changed his destiny. The year was 1937, and McLean was delivering cotton bales from Fayetteville, North Carolina, to Hoboken, New Jersey. Arriving in Hoboken, McLean was forced to wait hours to unload his truck trailer. He recalled: "I had to wait most of the day to deliver the bales, sitting there in my truck, watching stevedores load other cargo. It struck me that I was looking at a lot of wasted time and money. I watched them take each crate off the truck and slip it into a sling, which would then lift the crate into the hold of the ship."1 It would be nineteen years before McLean converted his thought into a business proposition.

For the next decade and a half, Mclean concentrated on his trucking business, and by the early 1950s, with 1,776 trucks and thirty-seven transport terminals along the eastern seaboard, he had built his operation into the largest trucking fleet in the South and the fifth-largest in the country. As the trucking business matured, states adopted a new series of weight restrictions and levying fees. Truck trailers passing through multiple states could be fined for excessively heavy loads. It became a balancing act for truckers to haul as much weight as possible without triggering any fees. McLean knew that there must be a more efficient way to transport cargo, and his thoughts returned to the shipping vessels that ran along the U.S. coastline. He believed "that ships would be a cost effective way around shoreside weight restrictions . . . no tire, no chassis repairs, no drivers, no fuel costs . . . Just the trailer, free of its wheels. Free to be lifted unencumbered. And not just one trailer, or two of them, or five, or a dozen, but hundreds, on one ship."2 In many ways, McLean's vision was nothing new. As far back as 1929, Seatrain had carried railroad boxcars on its sea vessels to transport goods between New York and Cuba. In addition, it was not uncommon for ships to randomly carry large boxes on board, but no shipping business was dedicated to a systematic process of hauling boxed cargo.

Seeing the feasibility of these types of operations may have inspired McLean to take the concept to a new level. Transporting "containerized cargo" seemed to be a natural, cost-effective extension of his business. McLean initially envisioned his trucking fleet as an integral part of an extended transportation network. Instead of truckers traversing the eastern coastline, a few strategic trucking hubs in the South and North would function as end points, delivering and receiving goods at key port cities. The ship would be responsible for the majority of the travel—leaving the trucks to conduct short, mostly intrastate runs generally immune from levying fees.

He needed to convince lots of customers to rely less on his former business, trucking.

With the concept in mind, McLean redesigned truck trailers into two parts—a truck bed on wheels and an independent box trailer, or container. He had not envisioned a Seatrain type of business, in which the boxcar is rolled onto the ship through the power of its own wheels. On the contrary, McLean saw several stackable trailers in the hull of the ship. The trailers would need to be constructed of heavy steel so that they could withstand rough seas and protect their contents. They would also have to be designed without permanent wheel attachments and would have to fit neatly in stacks. McLean patented a steel-reinforced corner-post structure, which allowed the trailers to be gripped for loading from their wheeled platforms and provided the strength needed for stacking. At the same time, McLean acquired the Pan-Atlantic Steamship Company, which was based in Alabama and had shipping and docking rights in prime eastern port cities.

Buying Pan-Atlantic for $7 million, McLean noted that the acquisition would "permit us to proceed immediately with plans for construction of trailerships to supplement Pan-Atlantic's conventional cargo and passenger operations on the Atlantic and Gulf coasts."3 He believed that his strong trucking company, combined with newly redesigned cargo ships, would become a formidable force in the transportation industry. Commenting on McLean's controversial business plan, the Wall Street Journal reported: "One of the nation's oldest and sickest industries is embarking on a quiet attempt to cure some of its own ills. The patients are the operators of coastwise and intercoastal ships that carry dry cargoes."4 The cure, the article noted, was business operators like McLean who were breathing new life into the shipping industry.

Though McLean had resigned from the presidency of McLean Trucking and placed his ownership in trust, seven railroads accused him of violating the Interstate Commerce Act. The accusers attempted to block McLean from "establishing a coastwise sea-trailer transportation service."5 A section of the Interstate Commerce Act stated that it "was unlawful for anyone to take control or management in a common interest of two or more carriers without getting ICC's approval."6 Ultimately unable to secure ICC's endorsement, McLean was forced to choose between his ownership of his well-established trucking fleet or a speculative shipping venture. Though he had no experience in the shipping industry, McLean gave up everything he had worked for to bet on intermodal transportation. He sold his 75 percent interest in McLean Trucking for $6 million in 1955 and became the owner and president of Pan-Atlantic, which he renamed SeaLand Industries.

The maiden voyage for McLean's converted oil tanker, the Ideal X, carried fifty-eight new box trailers or containers from Port Newark, New Jersey, to Houston in April 1956. Industry followers, railroad authorities, and government officials watched the voyage closely. When the ship docked in Houston, it unloaded the containers onto trailer beds attached to non-McLean owned trucking fleets and its cargo was inspected. The contents were dry and secure. McLean's venture had passed its first hurdle, yet it was just one of many obstacles that he encountered. He needed to convince lots of customers to rely less on his former business, trucking. McLean also needed to persuade port authorities to redesign their dockyards to accommodate the lifting and storage of trailers, and he needed to rapidly expand the scope of his operations to ensure a steady and reliable revenue stream. Securing new clients proved the least difficult, since McLean's SeaLand service could transport goods at a 25 percent discount off the price of conventional travel, and it eliminated several steps in the transport process. In addition, since McLean's trailers were fully enclosed and secure, they were safe from pilferage and damage, which were considered costs of business in the traditional shipping industry. The safety of McLean's trailers also enabled customers to negotiate lower insurance rates for their cargo.

McLean's next challenge was convincing port authorities to redesign their sites to accommodate the new intermodal transport operation. Although he received his first big break with the backing of the New York Port Authority chairman, McLean continued to run into resistance. The tide did not change until the older ports witnessed the financial resurgence of port cities that had adopted containerization. His business got an additional boost when the Port of Oakland, California, invested $600,000 to build a new container-ship facility in the early 1960s, believing that the new facility would "revolutionize trade with Asia."7

To achieve the dramatic reductions in labor and dock servicing time, McLean was vigilant about standardization.
The labor savings associated with McLean's intermodal transportation business was a major victory for shippers and port authorities, but it was a huge threat to entrenched dockside unions. The traditional break-bulk process of loading and unloading ships and trucks necessitated huge armies of shore workers. For some ports, the real threat to the industry was not McLean but other modes of transportation that were making ship transport obsolete. By endorsing McLean's business strategy, port officials believed that they were protecting the future of their business. If that meant fewer workers, so be it. They reasoned that it was better to have fewer workers in a prosperous enterprise than many in a declining one.

To achieve the dramatic reductions in labor and dock servicing time, McLean was vigilant about standardization. His efforts to increase efficiency resulted in standardized container designs that were awarded patent protection. Believing that standardization was also the path to overall industry growth, McLean chose to make his patents available by issuing a royalty-free lease to the Industrial Organization for Standardization (ISO).8 The move toward greater standardization helped broaden the possibilities for intermodal transportation. In less than fifteen years, McLean had built the largest cargo-shipping business in the world. By the end of the 1960s, McLean's SeaLand Industries had twenty-seven thousand trailer-type containers, thirty-six trailer ships, and access to over thirty port cities.9 With a top market position, SeaLand was an attractive acquisition candidate, and in 1969, R.J. Reynolds purchased the company for $160 million. When he set out to gamble on his idea of containerized cargo, McLean probably did not realize that he was revolutionizing an industry. McLean's vision gave the shipping industry the jolt that it needed to survive for the next fifty years. By the end of the century, container shipping was transporting approximately 90 percent of the world's trade cargo.10 Though we have coded McLean as a leader in our research, some of his approaches and characteristics have more of an entrepreneurial flavor. There is often a fine line between creation and reinvention, and though the lines sometimes blur, we have generally tended to cite individuals as leaders when their innovations help restructure or reinvent an industry rather than create an entirely new one. For this reason, we see McLean as a leader.

Reprinted by permission of Harvard Business School Press. Excerpted from In Their Time: The Greatest Business Leaders of the Twentieth Century by Anthony J. Mayo and Nitin Nohria. Copyright 2005 Harvard Business School Publishing Corporation.

Thursday, October 06, 2005

Rhetoric vs. Reality.

Patents: Agreeing to disagree?

By Victoria Shannon International Herald Tribune

THURSDAY, OCTOBER 6, 2005

PARIS: In Britain, a typical neonatal unit used to pay about £2,000 a year to supply nitric oxide for newborn babies with breathing difficulties. After the substance was patented in 1999, the cost rose to £63,000, according to a study published this year by Parliament in London.

What if governments abolished patents? Would those newborns and other parts of society be better served? Or would inventors have fewer financial incentives to give the world their bright ideas?

Increasingly, such questions are percolating through business gatherings, Internet chat rooms, university lecture halls and the corridors of legislatures. They are both ethical and economic, and for many people, also largely rhetorical.

For while media, industry, lawyers and academics gnash teeth over who owns what, the market simply demands ever sharper photographic images or ever easier access to a favorite rock band - and progress marches on.

In the meantime, global conversations over who has the rights to ideas and artistic products are grinding into stalemate. This summer, after five years of intermittent progress, European legislation allowing patents on software was lobbied to death. A rights treaty for broadcasters before the World Intellectual Property Organization is stalled for the second consecutive year, and talks have been going on since 1998.

Tweaking the rights systems is now high on the agenda of legislators in developed countries that fear a loss of profit, competitiveness or even control. A long-awaited Patent Reform Act is just now getting an airing in the U.S. Congress. After the bitter battle over software patents, the European Union may move forward on EU-wide patent coverage. Japan is starting to reexamine its system, and India and China are beginning to enforce recent adjustments.

But the changes are largely at the margins and do not take into account some of the more extreme views on "free" patents, open-source software and shared copyrights that have emerged over the past decade out of the generation that built the Internet.

In the end, many executives and academics who study intellectual property conclude that the capitalist world is unlikely to toss out its patent systems and other long-held approaches to generating innovation. Many of the companies affected are content to let the systems quietly evolve to catch up to the technology they have lagged behind.

"They were arguing about this 500 years ago, they will be arguing about it 500 years from now," said Scott McNealy, chief executive of Sun Microsystems, discussing the tussle between private control and public good.

Unlike Sun, which both protects and shares its patents, Microsoft as a rule does not share. The software leader has applied for more than 3,000 patents this year, spends more than $7 billion a year on research and development, and is facing 158 legal challenges to its patents.

Officially, Microsoft this year issued detailed principles that it said it hoped would guide U.S. patent reform, like elevating the quality of patent applications that are approved and curbing litigation.

But Horacio Gutierrez, associate general counsel for Microsoft in Europe, said that he believed the extreme views would converge over time, at least in the software industry.

Pure commercial software companies, along with companies that want to make a business out of the open-source software that is produced by the developer community at large, "are actually being driven to the middle," he said, "while these other debates are happening at the religious level."

Microsoft, of course, is such a giant presence in computer operating systems and desktop software that it stands to benefit from any changes that emerge from the market, which it indirectly controls. So far, it has also successfully skirted efforts by U.S. courts and the European Union to break up what many perceive as a near monopoly in certain fields.

Activists determined to liberate ideas and technologies remain committed to upending the system with their debates.

Some of them advocate replacing copyrights with "copylefts" - a license to let the user modify a product for commercial gain while leaving the underlying idea free for others to use.

Numerous licensing agreements that loosen the legal rights of the creators to own ideas are now available and in growing use. There are more than 50 different kinds of open-source licenses, for instance.

"The user has to have the right to do with software that he bought as he wants - that is a must for us," said Joachim Jacobs of the Free Software Foundation of Europe.

And recent moves by Microsoft seem to acknowledge that radical solutions are influencing the system. Gutierrez cites two recent Microsoft deals as examples of new thinking on intellectual property rights.

One is the agreement made last week with JBoss, a Swiss and American open-source developer, on software collaboration, even though the companies still compete for developers.

"The companies are exploring opportunities to improve interoperability and ensure an optimized experience for customers using JBoss on the Windows Server platform," Microsoft said.

The other is with Inria, the French computer science research institute, on joint research that would be considered the intellectual property of the institute.

Gutierrez even conceded that "it might be possible for Microsoft to use some open-source licenses in the future" - a notable admission from a company whose chief executive, Steve Ballmer, identified open-source software like Linux as a threat to the company's own products in 2003.

Other small steps are being taken to free up inventions for essentially unlimited access:

Creative Commons, a nonprofit organization based in San Francisco, was started by the Stanford University academic and lawyer Lawrence Lessig to allow users to copy and distribute a copyrighted work provided that they give credit. The group makes no promise that its version of copyrights is enforceable in court. But it is being used in about 30 countries, including China, Australia, Germany and Britain.

General Public Licenses, which date from the 1980s, when Richard Stallman introduced them at the Massachusetts Institute of Technology, let users change and distribute software and even charge for it.

As companies like International Business Machines, Sun and Nokia let more of their intellectual property out into the open, keeping track of what rights are shared and which ones are protected is becoming unwieldy. To deal with this problem, one software group is championing what it calls a "patent commons" - a database of such moves to give users confidence that the correct rights are being enforced.

The World Trade Organization agreed in August 2003 to make it easier for countries to use copied drugs - even when those drugs come from locations where copying a patented drug would be illegal.

The move was seen as a sign of the strength of campaigners' arguments to make drugs for diseases like AIDS affordable in the developing world.

Dietmar Harhoff, a professor and patent expert at Ludwig-Maximilian University in Munich, is calling for a crackdown on overpatenting. "More patents do not automatically mean more innovation," he wrote in a position paper in August. "Patents per se are irrelevant. Their impact on innovation and investment counts."

Some of the biggest companies in the world are starting to shift as skepticism and frustration grow about a world in which you never know when someone else may own - or claim to own - an important chunk of your big idea.

In talking about software patenting this summer, Ed Black, president and chief executive of the Computer and
Communications Industry Association, which operates in the United States and Europe, conceded that many companies, like the public and legislators, had mixed views.

"Their legal departments are charged with getting as many patents as possible, while their engineers don't believe patents help the creative process of innovation," he said.

Richard Sutor, vice president for standards and open source at IBM, said, "Fundamentally, the world is becoming more open. It's too early to tell exactly what is going to happen, but the rise of open source and increasing availability of open standards is driving a shift from proprietary to more open models."

Said Gutierrez of Microsoft: "My bet is, you are going to start seeing a lot more convergence and a lot more business sense included in these discussions."

James Kanter and Kevin J. O'Brien contributed to this report.

In Defense of the True New Economy.

A boom in expert-witness firms

By John Markoff The New York Times

SUNDAY, OCTOBER 2, 2005

SUNNYVALE, California: Lawsuits over who can profit from ideas and innovation are increasingly a foundation of the technology industry. As a result, competition once played out in the marketplace is now routinely carried on in the courtroom.

That has touched off a quiet race among companies to assemble teams of expert witnesses - the technical experts and technology-savvy economists who will help sway judge and jury on the intensely complex merits of a patent case.

A thriving industry in expert witnesses - who are paid as much as $1,000 an hour - has become part of the fabric of the global patent system and the increasingly contentious legal combat that surrounds it.

"There is a very small circle of world-class technology economists, and both sides know who they are," said Thomas McCoy, the lead lawyer for Advanced Micro Devices, which is preparing for a legal battle with Intel over chip patents.

That small circle has been eclipsed by an explosion of small and large expert-witness firms. They range from giants like LECG and Exponent, global companies with expertise in a vast array of fields, to litigation-support businesses like Chatham Group, based in Los Altos, California, and operated by Jerry Klein.

In recent years, the handful of large U.S. expert-witness firms has made "handshake" agreements to act in partnership with companies that are accumulating portfolios of patents with the intent of collecting revenue from them, said Jack Russo, a specialist on intellectual property in Palo Alto, California. He said this was similar to the informal networks that have been set up by insurance companies that require expert testimony in lawsuits.

Klein is a pioneer of the business. With a database of more than 1,000 experts, he has been operating as a kind of expert-witness "arms dealer" for more than 17 years. He finds experts, trains them in performing before a judge and jury and assembles teams of experts to perform the behind-the-scenes technical chores needed to prepare for an intellectual property lawsuit.

While Klein takes pride in being able to provide in-depth technical legal consulting, he often must deal with lawyers who are looking for a character straight out of central casting, he said: "The classic profile I get asked for is a gray-bearded 56-year-old Stanford professor who has written the leading textbook on some arcane technology area."

In reality, however, few experts actually end up in the courtroom. Instead, most of the work is the kind of tedious and painstaking analysis that a software consultant like Mark Seiden might perform in the early stages of a lawsuit, well before it goes to a judge.

Not long ago, Seiden, who is a partner at MSB Associates in San Mateo, California, was asked to look at a piece of software that was the centerpiece of a copyright fight involving three companies.

He began by writing his own software tools to help him compare thousands of lines of code to look for copyright infringement.

After several weeks, his software found a smoking gun - an unusual misspelling hidden deep within the infringing program.

Although he has worked as an expert "witness" for several decades, Seiden has never appeared before a jury.

That is just as well, he said: "Being on the stand is a very high-pressure, unpleasant thing. And most of the cases settle before going to court."

In Europe, expert witnesses are as much in demand as in the United States, and at comparable daily rates, according to Mark Solon, who runs Bond Solon, a British expert-witness training group.

Jan Brinkhof, a former Dutch patent judge, said that judges on the Continent sometimes appointed the experts themselves, although finding those with the required knowledge is not always easy.

Impartiality is a growing concern. In September, the Civil Justice Council, a body that advises senior members of the British judiciary, began recommending that experts in civil trials be prepared to give the same evidence no matter which side is paying them. The guidelines also reinforce rules allowing judges to impose fines on experts who mislead the court.
In the United States, one of the driving forces in the expert-witness industry was a 1993 ruling by the Supreme Court establishing standards intended to limit the practice of "junk science" in federal courts. Junk science is faulty scientific analysis used to advance a specific viewpoint.

That ruling created a process in which courts now routinely have an early role in hearing expert testimony related to claims. In many cases, the courts hold preliminary hearings and may reject a portion of a lawsuit, based on expert testimony, before it goes to trial.

Pending patent legislation now under discussion in the U.S. Congress could move much of the litigation into an arbitration system, which is more compressed and reduces the role of expert witnesses, some lawyers said.

Klein said that such a change could unravel a system that has done a good job of protecting the innovation at the heart of Silicon Valley.

"The system has flaws," he said. "But it's the best system in the world."

James Kanter contributed to this article from Paris.

More on the True New Economy.

Extracting gold from patents can bolster the bottom line

By Kevin J. O'Brien International Herald Tribune

MONDAY, OCTOBER 3, 2005

BERLIN The Dutch brand Philips is found on millions of televisions, stereos and other electronic products in living rooms around the world. Almost as ubiquitous are the products of the French manufacturer Thomson, which is known for its televisions, professional video equipment and TV set-top boxes.

Yet last year, these consumer electronics makers did not profit from making consumer electronics. Instead, Thomson got 75 percent of its operating earnings - 325 million of the total of 434 million, or $390 million of $522 million - by licensing its technology to other companies. Philips would have lost money on its consumer electronics business last year if not for 478 million in licensing income.

Squeezed by low-cost Asian manufacturers, niche competitors like Apple Computer and ambitious interlopers like Samsung Electronics, the industry's historic leaders are increasingly dependent on selling ideas rather than products, and at profit margins that are far wider than in the cutthroat world of consumer gadgetry.

"Intellectual property is playing an increasingly important role for our group," Rudy Provoost, head of Philips Consumer Electronics, said in an interview. "It's just a fact of life in our business now that you have to cultivate and protect IP."
The question is whether the traditional approach of developing, owning and mining patents for revenue has a future in a world where copies and knockoffs are increasingly simple to make, license fees easy to avoid and a certain part of the next generation more comfortable with "sharing" than with owning.

To be sure, the technology industry is still dominated by proprietary manufacturers like Sony, Philips and International Business Machines, which are more aggressive than ever in pursuing patents and patent infringement. This year, IBM is expected to file around 3,250 patents - the most of any company in the United States, said Robert Sutor, vice president for standards and open source at the company.

Companies say they license as a way to stay ahead of the swift mimicry of new technologies and designs that can turn a sales
sensation into an inexpensive commodity within months.

That is one reason Thomson last year licensed the rights to its RCA brand to TCL, a Chinese company, and why it charges others for using its critical technologies in the MPEG-4 video compression and MP3 audio compression formats.

"The so-called commoditization cycle - turning an innovation into a commodity - is in some cases shorter than a year," Jean-Charles Hourcade, chief technology officer at Thomson, said in an interview. "It is very difficult to base a strategy on pure product manufacturing any more." Today, Thomson is focusing on broadcast equipment and services.

Compared with manufacturing, licensing promises lower risk and higher income. Thomson in 2004 kept 81 cents of every euro in licensing sales as profit, but only 10 cents of every euro from sales of broadcasting equipment and services.

The French company's lawyers oversee enforcement of 45,740 corporate patents from 6,720 inventions, according to Thomson's 2004 annual report. Last year, Thomson filed 588 new patent applications and closed 878 licensing agreements with other companies.

At Philips, licensing income rose 61 percent in 2004, to 478 million, as the company profited from its ownership of CD and DVD technologies, among others. The Dutch company made licensing a priority in 2002, when it created a 500-member department to exploit the value of its 100,000 patents, 22,000 trademarks, 11,000 design rights and 2,000 Internet domain names.

"What you are seeing is that many global electronics companies, out of necessity, are turning to licensing to protect their investments," said Andy Morgan, an industry expert in London at the accounting firm PricewaterhouseCoopers.

Not all manufacturers are as aggressive as Philips and Thomson. Sony, for example, had sales from licensing of ¥31.4 billion, or $277 million, in the year that ended in March 2004 - less than 0.5 percent of the Japanese company's ¥7.16 trillion in total sales, said Yoshihide Nakamura, senior vice president in charge of intellectual property at Sony.
While Philips and Thomson say licensing brings a welcome second source of income, some experts say the dual strategy is a sign of weakness.

"Thomson has basically announced that they are no longer interested in being a consumer electronics company," said Jason Mauricio of Arete Research, a private research firm in London. "They have basically licensed out their TV screen business. That is the threat that faces Philips, Sony and all the rest."

The most sustainable business strategies, Mauricio said, involve developing, making and selling products, rather than merely collecting royalties on patents that will eventually expire.

Danny Rimer, a partner in London at Index Ventures, a fund company that has 750 million invested in technology companies, said businesses based solely on licensing had limited futures.

"Most entrepreneurs view IP as a defensive mechanism and not as an opportunity for creating a business," Rimer said.

"Companies having the greatest challenges adapting to the new world are banking on exploiting IP weaknesses."

By releasing 500 software patents free to the public this year, IBM is wagering that it will earn more by letting outsiders innovate from its technology than it would by just collecting licensing fees, Sutor said. IBM's move prompted Sun
Microsystems, Computer Associates International and Nokia to take similar action.

As electronics makers bulk up their staffs of patent attorneys, some experts say consumers may end up suffering as lawsuit-prone corporations cast a chilling effect over small, independent inventors. In 1984, companies filed 19 infringement lawsuits for every 1,000 patents filed in the United States, said Dietmar Harhoff, a professor of copyright law at Ludwig Maximilian University in Munich; by 2000, the rate had nearly doubled, to 32 lawsuits per 1,000 patents.

Some inventors, however, are quick to note that without copyright protection, they would have little incentive to innovate.
Roland Moreno, a French inventor who said he had earned more than 100 million in royalties from his patent on the smart card, said, "Inventors need an incentive to create and should be rewarded for innovation."

The True New Economy.

The Idea Economy: Battle over right to sell knowledge

By James Kanter International Herald Tribune

SUNDAY, OCTOBER 2, 2005

PARIS: In another era, a nation's most valuable assets were its natural resources — coal, say, or amber waves of grain. But in the information economy of the 21st century, the most priceless resource is often an idea, along with the right to profit from it.

This reality is transforming business and creating new diplomatic fault lines between continents. Some companies — Thomson of France, in consumer electronics, and BTG of Britain, in technology, for example — can make more money selling access to their ideas than from building anything themselves. The right to profit from a breakthrough idea can be so valuable that the contest over the concept can be more decisive than the competition for consumers, as Sony and Toshiba demonstrate in their tug of war over whose next-generation DVD patents will win out, long before the discs come to market.

From the United States to Europe and Japan, more patents were sought in the past 20 years than in the previous 100, evidence that protecting the rights to an idea is itself growing in importance. Patents ''are becoming the highest-value assets in any economy,'' said Jerry Sheehan, an economist with the Organization for Economic Cooperation and Development in Paris.

But a crisis is at hand, say government officials, corporate executives and academic experts, and the future of idea creation as the grease of the global economy, the force in deciding winners and losers, is in the balance.

Today, the process for capitalizing — either financially or socially — on innovation and creativity is staggering under the strain of a digital revolution of a speed and scale never seen before. At a time when many of their most valuable assets can be shared and exchanged easily, businesses and governments scrambling to redefine who owns what.

Failure to resolve where to draw the line on ownership of ideas will mean even more litigation and even more multimillion-dollar lobbying battles in the halls of the U.S. Congress and the European Parliament. Ultimately, experts say, some innovations and creations will never be exploited because it costs too much money and time to pursue the rights.

Ideas that are free, widely available and instantly duplicated were impossible to contemplate in the days when copyright and patent law took root, a time when the expenses needed to print, distribute and sell a book or movie were considerable.

Now, the information, entertainment and technology industries say they lose billions of sales to the free exchange of ideas. Incremental advances are stalled by endless lawsuits over inventions. Drug companies are on the defensive when they refuse to share their original research. And regulatory changes — like the European software patent directive this summer — are dying under the weight of lobbying forces from both sides.

The battles pit companies against companies, creators against distributors, almost everyone against the United States — and, some say, China against the rest of the world. ''This is warfare,'' said Jerry Klein, a Silicon Valley entrepreneur. ''It's a high-stakes intellectual battle, and it's very complicated.''

Companies, even those the size of Intel, could one day be blocked from marketing a particular product whose design is made up of hundreds of thousands of patents just because an opportunist has claimed ownership of a single patent, said Adam Jaffe, dean of arts and sciences at Brandeis University in Massachusetts and a patent expert.

Some intellectuals say that the more such rights are expanded, the less good the public reaps, a benefit that government's protection of innovation once intended. And now some companies are starting to agree, arguing that the race for rights and royalties can actually harm competition.

''In certain cases,'' said Elsa Lion, an analyst at the London research firm Ovum, ''technology companies are beginning to realize they have more to gain by releasing patents to the general public than by hoarding licensing income.''

By giving away some of their knowledge, companies like IBM and Nokia are not just polishing their image among the Internet generation.

They are also questioning a business strategy that has become a bedrock of contemporary capitalism: Whoever has the most patents wins.

The real problem is how to fashion a system that promotes innovation, not mere accumulation. If savvy entrepreneurs can manipulate the system by locking down valuable ideas, true pioneers will find it too tough to win rewards for their inventions.

''Our standards-setting process risks being corrupted by having people filing for, and getting, any patents they want. That poses a real danger to the effectiveness of innovation,'' said Josh Lerner of Harvard Business School.

Dietmar Harhoff, a professor at Ludwig-Maximilian University in Munich and an expert in innovation research, said, ''I think it has made some independent inventors less aggressive for fear of lawsuits.''

Here to stay?

The number of patents issued in the past 10 years has never been seen before, soaring to more than 958,000 in 2004 from about 642,000 in 1995, in part because of breakthroughs in digitization and the life sciences.

At the same time, governments have made holding patents increasingly appealing by giving companies more ammunition against copycats and other challengers in the form of favorable judgments and long ownership terms.

And patent offices worldwide, overwhelmed by new applications, are under growing pressure to cut backlogs by using hasty assessments, creating the conditions for what Harhoff called ''a vicious cycle of deteriorating quality.''

Of course, despite the legal quagmire and grass-roots efforts to publicly share innovation, patents are not going away. Industry experts say companies need to freely register their ideas, given the swiftly moving nature of technology and competition.

Patents are supposed to stop others from making, using or selling an invention for 20 years in Europe, Japan and the United States, the three parts of the world where about 85 percent of all patents are granted.

Like any other form of property or asset, patents can be bought, sold, leased or mortgaged. Businesses even give patents back to the government in exchange for tax breaks. Start-up companies use patents — often their only collateral — to lure investment from venture capitalists. Midsize businesses swap and barter patents, even with rivals, to build products they could not make on their own. And many companies license patents to bolster their balance sheets.

In the 1980s, Kenneth Dam, then an executive at International Business Machines, helped push the company to increase its patent output as a one of a number of strategies to nurse it back to health. Its U.S. patents numbered 3,248 in 2004, up from 607 in 1990, when the company began tracking the figures, according to John Bukovinsky, an IBM spokesman. Last year — the 12th in a row that IBM took home the most U.S. patents — it earned $1.2 billion from its intellectual property holdings including patents, or about 15 percent of the company's $8.1 billion total income.

IBM's patent strategy helped make research into ''a profit center rather than a cost center,'' said Dam, now an emeritus professor at University of Chicago Law School. He said patents also were ''a way of demonstrating IBM's technological leadership.''

Like IBM executives two decades ago, Bill Gates, chairman of Microsoft, is pushing his company to switch into high gear, setting ever higher goals for patent applications — 3,000 in the financial year just ended — for his staff. (In 1990, Microsoft, then a 15-year-old company, was awarded only five patents.)

'Trolls' cashing in

Critics say the skyrocketing volume of patent applications makes it increasingly difficult to assess whether the underlying ideas are valuable, nonessential or even valueless. Critics also say the current system encourages using the courts to sue other firms for using ideas you registered first.

Apple Computer's best-selling iPod is a prime example. In early August, Microsoft boasted of snaring a patent on parts of the
design of Apple's portable music player two months before Apple started marketing the iPod in 2002. Two weeks later, Creative Technology, of Singapore, claimed patent rights on the interface on an iPod screen, saying it would sue Apple for damages.

A lone ''patent troll'' looking to extract huge payments from big companies on patents that were never commercialized has yet to wipe out a Fortune 500 company. But Horacio Gutierrez, associate general counsel of Microsoft Europe, does not think it is impossible.

A patent infringement case against Microsoft in 2003, for instance, cost it $521 million, he said. Likewise, he cited an outstanding case against the maker of the BlackBerry e-mail device, Research in Motion, that at one point was close to a $450 million settlement, nearly equal to RIM's quarterly sales.

Similarly, in March, the German chip maker Infineon Technologies agreed to pay Rambus, a California chip designer, quarterly amounts totaling nearly $50 million until 2007 with the possibility of further payments of up to $100 million to settle a U.S. patent. The suit could have entitled Rambus to as much as a 3.5 percent share of all memory chip sales in the $26 billion industry, or revenue of about $910 million annually, said Michael Cohen, a California-based analyst with Pacific American Securities.

Rambus, which is expected to earn about $21 million this year from licensing patents, spent $23.1 million on litigation in 2004 and has pending fights with other chip makers, including Samsung of South Korea, which continue to accuse Rambus of making overly broad claims to ownership of vital chip technologies.

''Today's collaborative technologies are presenting a real challenge for patent law,'' Jaffe, the patent expert, said, ''and for the kinds of thinking that emerged at the time of Thomas Edison and Alexander Graham Bell, when individual inventions seemed much more distinct, much less complex.''

In June, a trade group including Bertelsmann and EMI accused Toshiba, Philips and others of breaking antitrust laws by overcharging for the DVD standard, a technology protected by hundreds of patents. In a complaint to European authorities, the music companies said similar fees on patents for a new generation of DVDs to be introduced this year would also be anticompetitive and mean higher retail prices.

The Geneva-based group, the International Optical Disc Replicators Association, said companies like Toshiba and Philips, whose research led to DVD technology, had failed to honor promises to European and U.S. authorities that only ''essential'' patents would be licensed and that an ''independent expert'' would be appointed to evaluate their legitimacy.

Guy Marriott, the trade association chairman, also accused the patent holders of refusing to cut licensing fees sufficiently to match declines in the value of DVDs on world markets, declines that Toshiba, Philips and the others get a direct benefit from since they also make DVDs. ''Our members are paying for patents that they do not want or need,'' Marriott said. ''There already are hundreds of patents on this generation of DVDs. What will happen when the companies launch the next generation of discs and start claiming thousands of patents?''

The technology companies are preparing their defense, stressing that antitrust officials previously approved their licensing program, said one lawyer involved in the matter. The lawyer spoke on condition of anonymity, saying that antitrust officials had made no decision about whether to pursue the complaint.

The disc association met with Department of Justice officials this year but made no formal complaint. Frank Fine, a lawyer for the association, said the U.S. officials showed no interest in investigating their concerns. European regulators are ''studying the complaint,'' said a spokeswoman for Neelie Kroes, the EU competition commissioner.

If there is trans-Atlantic divergence over the DVD case, it would not be an isolated instance. Experts point to Europe's failure this year to pass a software patent law as the most recent difference in views over how to protect ideas. After years of lobbying frenzy in Brussels and Strasbourg, the law failed in the European Parliament in July after some software developers warned that their ability to write code would be compromised by U.S.-style patent standards.

''The Bush administration seems to think patent holders can do no wrong,'' said Fine, the Brussels lawyer for the DVD trade group. ''But the U.S. is badly out of whack, and we think the Europeans will want to reset the balance.''

Shift in corporate attitudes

Even if the technology companies successfully defend themselves against the group's challenge, other battles concerning ''overpatenting'' lie ahead. The U.S. Congress already is looking at ways overhaul the patent system.

So is the world's patent leader, IBM. While the sun is far from setting on the 21st century gold rush, IBM already is anticipating a time when the environment will not be so friendly.

In January, John Kelly, senior vice president for technology and intellectual property at IBM, announced the release of 500 IBM patents for use by open-source programmers. ''This is not a one-time event,'' Kelly said at the time.
Lerner at Harvard sees ''a big shift in corporate attitudes'' in the move by IBM.

''Reform is being driven by the sense that the system is out of control,'' he said. ''As a result, we are moving into a world where patent holders won't be islands anymore, but knowledge-sharing organizations.''

Victoria Shannon, Kevin J. O'Brien and John Markoff contributed to this report.

Monday, October 03, 2005

Happiness should be the absence of metrics.

Discontent arises from comparison with the lot of others.

---

October 4, 2005

A New Measure of Well-Being From a Happy Little Kingdom

By ANDREW C. REVKIN

What is happiness? In the United States and in many other industrialized countries, it is often equated with money.

Economists measure consumer confidence on the assumption that the resulting figure says something about progress and public welfare. The gross domestic product, or G.D.P., is routinely used as shorthand for the well-being of a nation.

But the small Himalayan kingdom of Bhutan has been trying out a different idea.

In 1972, concerned about the problems afflicting other developing countries that focused only on economic growth, Bhutan's newly crowned leader, King Jigme Singye Wangchuck, decided to make his nation's priority not its G.D.P. but its G.N.H., or gross national happiness.

Bhutan, the king said, needed to ensure that prosperity was shared across society and that it was balanced against preserving cultural traditions, protecting the environment and maintaining a responsive government. The king, now 49, has been instituting policies aimed at accomplishing these goals.

Now Bhutan's example, while still a work in progress, is serving as a catalyst for far broader discussions of national well-being.

Around the world, a growing number of economists, social scientists, corporate leaders and bureaucrats are trying to develop measurements that take into account not just the flow of money but also access to health care, free time with family, conservation of natural resources and other noneconomic factors.

The goal, according to many involved in this effort, is in part to return to a richer definition of the word happiness, more like what the signers of the Declaration of Independence had in mind when they included "the pursuit of happiness" as an inalienable right equal to liberty and life itself.

The founding fathers, said John Ralston Saul, a Canadian political philosopher, defined happiness as a balance of individual and community interests. "The Enlightenment theory of happiness was an expression of public good or the public welfare, of the contentment of the people," Mr. Saul said. And, he added, this could not be further from "the 20th-century idea that you should smile because you're at Disneyland."

Mr. Saul was one of about 400 people from more than a dozen countries who gathered recently to consider new ways to define and assess prosperity.

The meeting, held at St. Francis Xavier University in northern Nova Scotia, was a mix of soft ideals and hard-nosed number crunching. Many participants insisted that the focus on commerce and consumption that dominated the 20th century need not be the norm in the 21st century.

Among the attendees were three dozen representatives from Bhutan - teachers, monks, government officials and others - who came to promote what the Switzerland-size country has learned about building a fulfilled, contented society.

While household incomes in Bhutan remain among the world's lowest, life expectancy increased by 19 years from 1984 to 1998, jumping to 66 years. The country, which is preparing to shift to a constitution and an elected government, requires that at least 60 percent of its lands remain forested, welcomes a limited stream of wealthy tourists and exports hydropower to India.

"We have to think of human well-being in broader terms," said Lyonpo Jigmi Thinley, Bhutan's home minister and ex-prime minister. "Material well-being is only one component. That doesn't ensure that you're at peace with your environment and in harmony with each other."

It is a concept grounded in Buddhist doctrine, and even a decade ago it might have been dismissed by most economists and international policy experts as naïve idealism.

Indeed, America's brief flirtation with a similar concept, encapsulated in E. F. Schumacher's 1973 bestseller "Small Is Beautiful: Economics as if People Mattered," ended abruptly with the huge and continuing burst of consumer-driven economic growth that exploded first in industrialized countries and has been spreading in fast-growing developing countries like China.

Yet many experts say it was this very explosion of affluence that eventually led social scientists to realize that economic growth is not always synonymous with progress.

In the early stages of a climb out of poverty, for a household or a country, incomes and contentment grow in lockstep. But various studies show that beyond certain thresholds, roughly as annual per capita income passes $10,000 or $20,000, happiness does not keep up.

And some countries, studies found, were happier than they should be. In the World Values Survey, a project under way since 1995, Ronald Inglehart, a political scientist at the University of Michigan, found that Latin American countries, for example, registered far more subjective happiness than their economic status would suggest.

In contrast, countries that had experienced communist rule were unhappier than noncommunist countries with similar household incomes - even long after communism had collapsed.

"Some types of societies clearly do a much better job of enhancing their people's sense of happiness and well-being than other ones even apart from the somewhat obvious fact that it's better to be rich than to be poor," Dr. Inglehart said.

Even more striking, beyond a certain threshold of wealth people appear to redefine happiness, studies suggest, focusing on their relative position in society instead of their material status.

Nothing defines this shift better than a 1998 survey of 257 students, faculty and staff members at the Harvard School of Public Health.

In the study, the researchers, Sara J. Solnick and David Hemenway, gave the subjects a choice of earning $50,000 a year in a world where the average salary was $25,000 or $100,000 a year where the average was $200,000.

About 50 percent of the participants, the researchers found, chose the first option, preferring to be half as prosperous but richer than their neighbors.

Such findings have contributed to the new effort to broaden the way countries and individuals gauge the quality of life - the subject of the Nova Scotia conference.

But researchers have been hard pressed to develop measuring techniques that can capture this broader concept of well-being.

One approach is to study how individuals perceive the daily flow of their lives, having them keep diary-like charts reflecting how various activities, from paying bills to playing softball, make them feel.

A research team at Princeton is working with the Bureau of Labor Statistics to incorporate this kind of charting into its new "time use" survey, which began last year and is given to 4,000 Americans each month.

"The idea is to start with life as we experience it and then try to understand what helps people feel fulfilled and create conditions that generate that," said Dr. Alan B. Krueger, a Princeton economist working on the survey.

For example, he said, subjecting students to more testing in order to make them more competitive may equip them to succeed in the American quest for ever more income. But that benefit would have to be balanced against the problems that come with the increased stress imposed by additional testing.

"We should not be hoping to construct a utopia," Professor Krueger said. "What we should be talking about is piecemeal movement in the direction of things that make for a better life."

Another strategy is to track trends that can affect a community's well-being by mining existing statistics from censuses, surveys and government agencies that track health, the environment, the economy and other societal barometers.

The resulting scores can be charted in parallel to see how various indicators either complement or impede each other.

In March, Britain said it would begin developing such an "index of well-being," taking into account not only income but mental illness, civility, access to parks and crime rates.

In June, British officials released their first effort along those lines, a summary of "sustainable development indicators" intended to be a snapshot of social and environmental indicators like crime, traffic, pollution and recycling levels.

"What we do in one area of our lives can have an impact on many others, so joined-up thinking and action across central and local government is crucial," said Elliot Morley, Britain's environment minister.

In Canada, Hans Messinger, the director of industry measures and analysis for Statistics Canada, has been working informally with about 20 other economists and social scientists to develop that country's first national index of well-being.

Mr. Messinger is the person who, every month, takes the pulse of his country's economy, sifting streams of data about cash flow to generate the figure called gross domestic product. But for nearly a decade, he has been searching for a better way of measuring the quality of life.

"A sound economy is not an end to itself, but should serve a purpose, to improve society," Mr. Messinger said.

The new well-being index, Mr. Messinger said, will never replace the G.D.P. For one thing, economic activity, affected by weather, labor strikes and other factors, changes far more rapidly than other indicators of happiness.

But understanding what fosters well-being, he said, can help policy makers decide how to shape legislation or regulations.

Later this year, the Canadian group plans to release a first attempt at an index - an assessment of community health, living standards and people's division of time among work, family, voluntarism and other activities. Over the next several years, the team plans to integrate those findings with measurements of education, environmental quality, "community vitality" and the responsiveness of government. Similar initiatives are under way in Australia and New Zealand.

Ronald Colman, a political scientist and the research director for Canada's well-being index, said one challenge was to decide how much weight to give different indicators.

For example, Dr. Colman said, the amount of time devoted to volunteer activities in Canada has dropped more than 12 percent in the last decade.

"That's a real decline in community well-being, but that loss counts for nothing in our current measure of progress," he said.

But shifts in volunteer activity also cannot be easily assessed against cash-based activities, he said.

"Money has nothing to do with why volunteers do what they do," Dr. Colman said. "So how, in a way that's transparent and methodologically decent, do you come up with composite numbers that are meaningful?"

In the end, Canada's index could eventually take the form of a report card rather than a single G.D.P.-like number.

In the United States there have been a few experiments, like the Princeton plan to add a happiness component to labor surveys. But the focus remains on economics. The Census Bureau, for instance, still concentrates on collecting information about people's financial circumstances and possessions, not their perceptions or feelings, said Kurt J. Bauman, a demographer there.

But he added that there was growing interest in moving away from simply tracking indicators of poverty, for example, to looking more comprehensively at social conditions.

"Measuring whether poverty is going up or down is different than measuring changes in the ability of a family to feed itself," he said. "There definitely is a growing perception out there that if you focus too narrowly, you're missing a lot of the picture."

That shift was evident at the conference on Bhutan, organized by Dr. Colman, who is from Nova Scotia. Participants focused on an array of approaches to the happiness puzzle, from practical to radical.

John de Graaf, a Seattle filmmaker and campaigner trying to cut the amount of time people devote to work, wore a T-shirt that said, "Medieval peasants worked less than you do."

In an open discussion, Marc van Bogaert from Belgium described his path to happiness: "I want to live in a world without money."

Al Chaddock, a painter from Nova Scotia, immediately offered a suggestion: "Become an artist."

Other attendees insisted that old-fashioned capitalism could persist even with a shift to goals broader than just making money.

Ray C. Anderson, the founder of Interface Inc., an Atlanta-based carpet company with nearly $1 billion in annual sales, described his company's 11-year-old program to cut pollution and switch to renewable materials.

Mr. Anderson said he was "a radical industrialist, but as competitive as anyone you know and as profit-minded."

Some experts who attended the weeklong conference questioned whether national well-being could really be defined. Just the act of trying to quantify happiness could threaten it, said Frank Bracho, a Venezuelan economist and former ambassador to India. After all, he said, "The most important things in life are not prone to measurement - like love."

But Mr. Messinger argued that the weaknesses of the established model, dominated by economics, demanded the effort.

Other economists pointed out that happiness itself can be illusory.

"Even in a very miserable condition you can be very happy if you are grateful for small mercies," said Siddiqur Osmani, a professor of applied economics from the University of Ulster in Ireland. "If someone is starving and hungry and given two scraps of food a day, he can be very happy."

Bhutanese officials at the meeting described a variety of initiatives aimed at creating the conditions that are most likely to improve the quality of life in the most equitable way.

Bhutan, which had no public education system in 1960, now has schools at all levels around the country and rotates teachers from urban to rural regions to be sure there is equal access to the best teachers, officials said.

Another goal, they said, is to sustain traditions while advancing. People entering hospitals with nonacute health problems can choose Western or traditional medicine.

The more that various effects of a policy are considered, and not simply the economic return, the more likely a country is to achieve a good balance, said Sangay Wangchuk, the head of Bhutan's national parks agency, citing agricultural policies as an example.

Bhutan's effort, in part, is aimed at avoiding the pattern seen in the study at Harvard, in which relative wealth becomes more important than the quality of life.

"The goal of life should not be limited to production, consumption, more production and more consumption," said Thakur S. Powdyel, a senior official in the Bhutanese Ministry of Education. "There is no necessary relationship between the level of possession and the level of well-being."

Mr. Saul, the Canadian political philosopher, said that Bhutan's shift in language from "product" to "happiness" was a profound move in and of itself.

Mechanisms for achieving and tracking happiness can be devised, he said, but only if the goal is articulated clearly from the start.

"It's ideas which determine the directions in which civilizations go," Mr. Saul said. "If you don't get your ideas right, it doesn't matter what policies you try to put in place."

Still, Bhutan's model may not work for larger countries. And even in Bhutan, not everyone is happy. Members of the country's delegation admitted their experiment was very much a work in progress, and they acknowledged that poverty and alcoholism remained serious problems.

The pressures of modernization are also increasing. Bhutan linked itself to the global cultural pipelines of television and the Internet in 1999, and there have been increasing reports in its nascent media of violence and disaffection, particularly among young people.

Some attendees, while welcoming Bhutan's goal, gently criticized the Bhutanese officials for dealing with a Nepali-speaking minority mainly by driving tens of thousands of them out of the country in recent decades, saying that was not a way to foster happiness.

"Bhutan is not a pure Shangri-La, so idyllic and away from all those flaws and foibles," conceded Karma Pedey, a Bhutanese educator dressed in a short dragon-covered jacket and a floor-length rainbow-striped traditional skirt.

But, looking around a packed auditorium, she added: "At same time, I'm very, very happy we have made a global impact."

Copyright 2005 The New York Times Company

Psychiatric disorders and immunity Molecular self-loathing

Anorexia and bulimia may be autoimmune diseases—and so may several other psychiatric illnesses

SOMETIMES, the immune system works in mysterious ways. During an infection one of its roles is to produce antibodies designed to attack and eliminate the invading bugs. However, in certain unlucky individuals the body also develops so-called autoantibodies which attack its own tissue, sometimes with devastating effects. The result is known as an autoimmune disease, two well-known examples of which are type-1 diabetes and multiple sclerosis. But there is a widespread suspicion among researchers in the field that a lot more diseases than these have an autoimmune component. In particular, they think, a number of illnesses usually labelled as “psychiatric” are actually, at bottom, the result of autoimmunity.
Until now, that suspicion has been based on correlations between certain sorts of infection and certain sets of psychiatric symptoms. But work just published in the Proceedings of the National Academy of Sciences by Serguei Fetissov of the Karolinska Institute in Stockholm and his colleagues has tied the connection more tightly for two psychiatric eating disorders—anorexia nervosa and bulimia nervosa.
Dr Fetissov's work suggests that abnormal levels of autoantibodies against hormones called melanocortins are a crucial part of the cause of these two diseases. Melanocortins are small protein molecules that carry messages between nerve cells in the brain. They are involved in regulating a variety of complex behaviours, including social interactions, stress responses and—most importantly in this context—food intake. So it is easy to see how interfering with them could cause anorexia and bulimia.
Shooting the messenger
To test this idea, Dr Fetissov and his colleagues analysed blood serum from three groups of women (both anorexia and bulimia are more common in women than in men). One of these groups consisted of people diagnosed as anorexic. The second was composed of individuals diagnosed as bulimic. The third contained people with no eating disorder.
The researchers looked to see whether there was any relationship between the levels of autoantibodies to melanocortins in these women and their expression of particular psychological traits—such as “Drive for thinness”, “Body dissatisfaction” and “Perfectionism”—which are associated with eating disorders and which can be measured using a specially designed scoring system.
What they found was intriguing. There was not one relationship, but two. The level of autoantibodies to melanocortins was positively correlated with anorexia, but it was inversely correlated with bulimia. These opposite correlations make sense. Although both disorders are associated with depression and self-doubt, anorexia involves a constant refusal to eat, whereas bulimia is a “diet-binge-purge disorder” that includes periods of excessive consumption. The molecular triggers of the two could thus easily be opposites.
The ultimate cause of the altered levels of autoantibody in anorexics and bulimics is unresolved as yet. However, according to the researchers, a clue may lie in the fact that micro-organisms, too, work in mysterious ways. In the world of bacteria and viruses, a strategy called molecular mimicry is common. In this, pathogens evolve to produce pieces of protein similar to those of their hosts, as a way of confusing that host's immune system. But the immune system is not always fooled, and in making antibodies to the “camouflage” proteins it sometimes turns out weapons that also attack the useful proteins that are being mimicked.
Two common gut bacteria, Escherichia coli and Helicobacter pylori, and also the influenza-A virus, are particularly adept at playing the evasive game of molecular mimicry, and the team is now looking at possible connections between different gut bacteria and autoantibodies against melanocortins to see if they can pin down which, if any, of these bugs might be responsible.
That is not to say, even if Dr Fetissov's idea is correct, that autoimmunity is the whole story. Both anorexia and bulimia are known to go hand in glove with particular personality characteristics which are not directly related to the disease. In anorexics, striving for perfection and conscientiousness are common non-pathological traits. In bulimics, such traits include risk-taking behaviour and problems with impulse control. So there appear to be predisposing factors at work, as well as the triggering effect of the autoantibodies.
Nevertheless, given the range of behaviours regulated by melanocortins and other, similar, messenger molecules, the suspicions that other psychiatric disorders—in particular, obsessive-compulsive disorder—are partly or wholly the product of a similar process seem entirely plausible. Dr Fetissov's work also adds weight to the idea that two other neurological diseases, schizophrenia and Tourette's syndrome, have an autoimmune component. In the case of these diseases, the damage seems to be caused irreversibly in the womb, suggesting that any autoantibodies involved are attacking structural molecules rather than messengers (attacks on structural molecules are the cause of multiple sclerosis, though they involve a different part of the immune system). That gives little hope for treatment.