Why worry about trade

Brad DeLong has got me confused in his recent blog posting – Grasping Reality with Both Hands: Brad DeLong’s Semi-Daily Journal: Potential Reasons for Worrying About Outsourcing/Offshoring

You see, trade balances. What we buy equals what we sell, in value. What we buy and what we sell can be goods, services, or property, but it balances. If we have a comparative advantage in nothing–and export nothing–then we necessarily have a comparative disadvantage in nothing–and import nothing. Trade is thus an opportunity for us to move workers out of occupations where we are least and into occupations where we are most productive.
This doesn’t mean we shouldn’t worry about trade. But it does mean that the right reasons to worry about trade are relatively specific and relatively small in number.
I see four reasons:
* First, we can worry about trade because we can worry about what trade does to our income distribution: perhaps we would be happier with our income distribution and assess ourselves as having a higher level of social welfare if we made some of the things we import at home and didn’t make some of the things we export–even though each of our imports and exports makes narrow profit-and-loss getting-and-spending sense.
* Second, we can worry about trade because we worry about what trade does to external benefits from productive activity that boost growth: perhaps we would grow faster and become richer if we made some of the things we import at home and didn’t make some of the things we export–because making some things produces increased worker skills and technological knowledge through unpriced, un-accounted for channels.
* Third, we can worry about trade to the extent that it amplifies the ability of our dysfunctional government to dysfunction: the ability to borrow from abroad to cover deficits may diminish the pressure on feckless politicians and their supporters to deal responsibly with fiscal policy.
* Fourth, we can agree that increased trade is good for the nation, yet believe that government has to play an active and aggressive role in providing social insurance and a measure of compensation to those ground exceedingly fine by the mills of globalization–and the rise of
It is not clear which of these reasons is behind Alan Blinder’s current worries on outsourcing and offshoring. My worries about outsourcing are mostly (4). I worry somewhat about (2). But (1) and (3) are, I think, not on the agenda. Global outsourcing seems to me at least as likely to improve as to worsen the distribution of income. And the marginal amount of governmental fecklessness produced by access to global capital markets seems to me to be small.

What I don’t understand are the three statements in the beginning:
1) “You see, trade balances. What we buy equals what we sell, in value. What we buy and what we sell can be goods, services, or property, but it balances.”
Yes, trade balances – and right now we are selling property to pay for goods and services. That is the age-old formula for bankruptcy (or what Buffet calls the sharecropper economy).
2) “If we have a comparative advantage in nothing–and export nothing–then we necessarily have a comparative disadvantage in nothing–and import nothing.”
Yes, when you have a comparative advantage in nothing you eventually stop importing – and we all know how pleasant an autarkic economy is
3) “Trade is thus an opportunity for us to move workers out of occupations where we are least and into occupations where we are most productive.”
How does it follow that if we have a comparative advantage in nothing, we can move workers into more productive occupations?
Theoretically, it is impossible to have a comparative advantage in nothing – because other countries will put all their resources into those areas (wine or cloth) where they have the comparative advantage, there by opening up some areas for us. Practically, however, countries follow absolute advantage – I’m better than you in both wine and cloth, so I’m going to make both and not bother with your imports.
What Blinder said yesterday was that the occupations we should be moving people into are in the non-traded sectors. Note that Blinder’s work has been to show that there are fewer and fewer of this.
That is what worries me.

Valuing the workforce – not

How many times have we heard the phrase: “our employees are our most valuable assets?” Guess they don’t really mean it. Bottom line is that workers are a cog in the machine — as evidenced by Circuit City’s announcement: Circuit City Cuts 3,400 ‘Overpaid’ Workers:

Circuit City fired 3,400 employees in stores across the country yesterday, saying they were making too much money and would be replaced by new hires willing to work for less.
The company said the dismissals had nothing to do with performance but were part of a larger effort to improve the bottom line. The firings represent about 9 percent of the company’s in-store workforce of 40,000.
“Retail is very competitive and store operations just have to contain their costs,” said Jim Babb, a Circuit City spokesman. “We deeply regret the negative impact that was had on these folks. It was no fault of theirs.”

Steven Pearlstein summed it up nicely Attempts to Trim the Fat Merely Cut at the Meat:

But if retail is as competitive as Babb says, you’d think a merchant might want to keep its best salespeople — you know, the ones who know the most and have records of selling the most. That would be particularly true at stores where customers have lots of questions that need answering — for example, those at a chain that sells major home appliances, flat-screen TVs and digital cameras.

Let me pull a Jim Cramer here — SELL NOW. They obviously don’t have clue and are grasping at straws.
Opps — too late. Wall Street has already told us what it thinks. Circuit City dropped over 4% yesterday.

Needed — a new trade policy – part 2

Yesterday, Alan Blinder, Jeff Faux and Fred Bergsten debated globalization on the Diane Rehm’s show. I use the term “debate” loosely because, as is usual in these situations, they talked past each other.
1) Faux never acknowledged that trade agreements can have a positive effect. Yes Jeff, I agree that the situation is bad. As I’ve said before, the only good news on the trade deficit is that we are digging the hole at a slower rate. But not negotiating trade opening agreements with places like Korea will keep us in the same situation of still digging the hole. We don’t need to completely stop negotiating agreements; we need to negotiate better agreements.
2) Bergsten never acknowledged that re-training is a best a half-hearted solution (if you are not creating jobs) and that wage insurance only works in limited circumstances. The unemployed worker who called in is never going to get back to $28 an hour — he is not going to get back to where he was in a few years by taking a lower wage job and working his way back up as he learns the general and firm-specific skills. His wage insurance will be a partial subsidy for a few years and when he loses it, he will be worse off. Yes, Fred, trade has positive benefits but you have to be competitive to gain those benefits. And in this new economy of task-based competition, education and skill level alone aren’t nearly enough.
3) Blinder went out of his way to re-assert his free trade ideology. But, his solution was the most protectionists of all — retrain people to go into naturally protected jobs, i.e. in the non-trade sectors of personal services. Yes, Alan, but what happens as there are more and more losers who need to be placed in those fewer and fewer naturally protected jobs? And as our economy retreats into those naturally protected non-trade jobs, how do we earn the income we need to pay for our imports. A natural autarkic economy (which is what you end up with) is not much better than a politically imposed one.
And the discussion completely focused on the wrong thing — job loss rather than wage competition. Fred completely ignored wage competition and pointed to the low unemployment rate as a measure of success. Alan mentioned it in the beginning as the real point to his analysis of offshoring — and never brought it up again. Jeff simply asserted that trade increased inequality, but never explained how.
So — the wise men are all blindly groping around the elephant.

Needed — a new trade policy

Yesterday, there were a number of trade activities and articles. Lou Dobbs (and others) testified on Capitol Hill at the House Foreign Affairs Committee on Trade, Foreign Policy and the American Worker (something I had an indirect role in bringing about – but that is another story). The Wall Street Journal ran a front page story on how Alan Blinder (and others) are re-evaluating the free trade policy (Pain From Free Trade Spurs Second Thoughts). And Steven Pearlstein’s column in the Washington Post (An Opportunity On Trade) outlined a potential Grand Bargain of joining a more effective worker retraining and adjustment policy with continued open markets.
Pearlstein is right when he starts by saying “We’re at a crucial moment in U.S. trade policy.” But neither his Grand Bargain nor the House hearings get at the core of situation.
Economic competition and trade is shifting from industries to tasks (as the organization of work continues to evolve). That is the point Alan Blinder and other raise (see Blinder’s paper in Foreign Affairs- Offshoring: The Next Industrial Revolution?, the Grossman/Rossi-Hansberg paper at last summer’s Fed Jackson Hole symposiumThe Rise of Offshoring: It’s Not Wine for Cloth Anymore, and Baldwin – Globalisation: the great unbundling(s).
As that shift continues, a trade policy that tries to shift workers from one industry to another is bound to fail unless it deals with the fundamental competition between workers on the task level. And that competition is due to that fact that, as Pearlstein states, “even the best-paid workers in many of the best-behaved countries earn a fraction of the wages of American workers.” Yet our entire trade policy is based on moving resources and workers from rising industries and out of declining industries (as evidenced by market winners and losers).
My frustration with the system is unless we deal with the task competition, all the retraining in the world won’t help — because our re-adjustment policy thinks it is shifting workers to new industries (supposedly where there is competitive advantage here so the jobs remain here) while it is actually re-training people into tasks were there may or may not be a US competitive. We will end up repeating the experience of the late 1990’s of re-training folks for jobs in the computer industry exactly at the time when those tasks were beginning to come under intense wage competition.
As a result, taxing the winners to pay the losers (the standard solution to the downside of globalization) becomes an ever deepening hole – as there are no industries to shift the losers into, only tasks that continue to be subject to continued wage competition or are in non-traded sectors. And there in lies the second problem. As task competition increases, are the only jobs left for Americans only in non-traded sectors? If so, how do we then earn the income need to pay for our imports?
As Paul Craig Roberts has pointed out in Manufacturing & Technology News :

All advocates of offshored production for U.S. markets fail to explain how the United States can balance its trade and current account deficits when its work force is being redirected into domestic nontradable services. The United States has made it thus far, because the U.S. dollar inherited the reserve currency role after WW II. Although less inclined than previously, foreigners are still willing to accept U.S. dollars for real goods and services. This willingness is threatened by large and persistent U.S. trade and budget deficits.
(Tuesday, March 13, 2007 Volume 14, No. 5 – subscription required)

Obviously, I don’t have an answer for how we get out of this box. My real problem is that we don’t even seem to acknowledge that we are in the box. Labor and environmental standards (while I support) don’t touch the issue. Neither does “new industries” – if most of those new industries consist mostly of tasks which are subject to global wage competition.
My hope is that the Grand Bargain isn’t a splitting of hairs — but a chance to re-evaluation our situation. I know the chances of that happening are slim – but I remain an optimist.

Valuing the workforce – highly

One of the most problematic valuations of an intangible involves the workforce. How can a financial metric capture the skills and knowledge, especially of a highly technical workforce. Partly for that reason, accounting rules explicitly forbid placing a value on an acquired workforce as part of a merger or acquisition — while explicitly requiring the valuation of other acquired intangible assets.
Valuation experts say they can come up with a number for the workforce – based either on the replacement costs (what it would cost to hire the same set of skills). That, of course, does not take into account the organizational and interpersonal aspects of a team of workers.
Another way is to look at the market valuation. How much is the equities market willing to pay. That approach has its own difficulties — as the DealBook blog of the New York Times points out (Blackstones Million Workers)

Are Blackstone Group’s employees really worth an average of $50 million apiece? That value, based on reports that the private equity firm could be worth $40 billion in an initial public offering, “could well be the highest bounty ever placed on the heads of office workers,” Breakingviews writes.

The Breakingviews article compares that level to the $10 million or so value placed on AOL and Google at the height of the dot.com bubble and the current $5 million per worker valuation of Moody’s, which has a more sustainable business.
As is the case with other equities-based measures of intangibles, it is hard to separate the value from the froth.

Open source patent process – part 2

Earlier this month, I posted an item about a new Patent Office pilot project to use an open source method for patent information. On Monday I was at a presentation by Beth Noveck from New York Law School who is running the project, called Peer to Patent. The presentation provided additional clarification on the scope of the pilot.
Unlike how some have described it, it is not a Wiki but a much more controlled information gathering and sharing process based on many models – including Nature magazine’s open peer review process. Nor is it the open ended post-grant review process that some fear. It is designed specifically to gather and evaluation information on prior-art. It will not deal with issues of the scope of the claims within the patent or about patentability — although those may be added later.
Essentially, the system is designed so that participants may suggest cases of relevant prior-art, including a detailed description of the relevancy. Participant will then vote to rank the top ten cases, to be forwarded to the patent examiner. One of the evaluation criteria will be if the examiners feel the information is useful.
This pilot will be confined to software patents. Already GE, HP, IBM, Microsoft and Red Hat have signed up to have some portion of their future patent applications go through the process. As an incentive for companies to participate in the project (i.e. waive the requirement for no public comment), PTO will expedite those applications.
The pilot is not a substitute for the proposed patent reform legislation. In fact, for the open review system to work to its highest potential, several changes to current law that are in that legislation will be needed. First is universal publication of patent applications. Right now, the applicant can ask that the application not be made public. Obviously, that would prevent open source review.
Second, a change in the regulation is needed to allow comment. Right now, an outside party may submit prior art to the PTO in the patent examination process – but may not comment on the application or that prior art. Thus, there can be no description of why the prior art is relevant. The applicant can waive this requirement to allow public comment. This is how the pilot program gets around the regulation. Thus, the pilot project is completely voluntary. But for the system to work to its fullest potential, public comments needs to be allowed in all cases.
Third, the fear of being found guilty of willful infringement needs to be reduced. Scientists and company experts might be hesitant to participate, for fear that reviewing applications would be used later as evidence that they had knowledge of some invention beforehand willfully infringed on the patent.
All three of these were in the proposed patent reform legislation from last year.
Noveck would also like a change in the scientific grants process – to have scientists who review grant application also review the patent applications based on that research. My own bet is that the process will attract grad students like flies to honey. It will provide an excellent platform for bright young students to get the early recognition as an expert in their field needed to launch successful career.
IBM is already encouraging its employees to participate. The IBM representative at the presentation said that willful infringement does not apply to reviewing applications – only knowledge of a granted patent. IBM’s participation should reduce that fear of willful infringement.
One thing to watch as the pilot unfolds is its effect on valuations. This could be a big incentive to participate in the program: to get a stronger patent. Those who participate can legitimately claim they have a strong patent with greater certainty and less chance to be challenged later on. As a result of greater certainty, the valuation should be higher. That, in turn, will be a spur to the growing movement to monetize intellectual property.

What’s in a number

What is in a number? Lots of hidden value if that number is 212. According to a story in the Christian Science Monitor (Backstory: In area codes, 212 is the only-est number), phone numbers with the Manhattan area code are selling a prices starting at $250 and ranging as high as $9000 to someone in Los Angeles. The reason:

“If you had to assign a number to the center of the universe in the American mind, that number might as well be 212,” says Robert Thompson, a professor of media at Syracuse University in New York. “It’s probably one of the most intensely imagined square miles in the nation, and to a degree, in the world.”

I think I will stick with my 202 area code. Maybe I should even stock up. You know — 202, Washington DC, capitol of the free world, same starting number as the White House and the Congress . . .
Then again, it may not have the same panache. As the Monitor points out:

The geographic diversity of [number reseller Sal] Pugliese’s clientele only seems to validate what New Yorkers have always said: Civilization has a center, and they live in it. But instead of bodily moving to the concrete jungle – an old-fashioned notion in a cyberenabled world – this new generation of aspiring New Yorkers simply obtains the city’s area code. With three simple digits, they tap into the glamour of “Sex and the City,” Wall Street, Broadway, and P Diddy. They’ve made it.

Such is the power of intangibles.

User-driven innovation – part 2

To follow on yesterday’s posting, there was another interesting point in Fitzgerald’s Sunday New York Times piece (How to Improve It? Ask Those Who Use It) on user-driven innovation:

One problem with the user-innovation model is that it can run into intellectual property rights protections. But the potential for creating new companies has led the government of Denmark to establish user-driven innovation as a policy. It found that Danish companies tended not to push for technological innovation, so user innovation may be the way to help them compete more effectively in a global economy.

The Danish government’s October 2005 report – User-Driven Innovation – Results and Recommendations highlights not just technology innovation — but product design. They specifically look at three industries in the US: electronics, medical devices and fashion. The results were seven recommendations:

1. Establishing an interdisciplinary education in user-driven innovation.
It is recommended that an interdisciplinary education be established, uniting academic disciplines necessary to analyse and assess customer needs and customer experiences.
Academic disciplines include psychology, sociology, ethnography and anthropology; disciplines that all relate to people, communities and society. A common deniminator for the disciplines could be human factors. The education may be designed as a superimposed course and could be offered as a graduate or master degree. The programme should be tied to a faculty, whose academic record creates a platform for research and education in human factors and related tool subjects.
2. Research. It is recommended that a university research institute supported by significant government funds that could spear-head research in the areas of human factors and consumer behaviour be established. High-quality research could also support a human resource master degree.
In the academic disciplines that constitute human factors, research constantly gains new insights. It must be expected that research in factors that motivate human behaviour may provide valuable insights. Often research is carried out in the cross section between the various disciplines.
The research institute should be established in a university with a strong record in human factor research.
3. Educational programmes in existing education. It is recommended that a short, yet comprehensive, educational programmes in the area of human factors be established. Innovation is more and more becoming a team-discipline, which necessitates the involvement of various professional skills and cultures. If user-driven innovation is to make a significant impact it is vital that different academic groups have a profound knowledge of human factor disciplines.
4. Life-long training. It is recommended that an extensive life-long learning programme in the area of human factors be established. Public co-financing of new courses in human factors could be tied to the supply of such programmes.
The organisation of life-long learning in human factors should be carried out in close cooperation with regional companies. The regional companies should also co-finance the strengthening of their employees’ skills.
5. Knowledge- and innovation centres. It is recommended that universities and other knowledge institutions in close cooperation with private companies establish knowledge and innovation centres, where interdisciplinary research teams can work with user-driven innovation and new technology in areas of interest to the Danish business community.
Basic research provides the core foundation for the research efforts, but should be supplemented by applied research when fulfilling the full potential of the basic research.
As new technology became a key competitive element, new institues emerged whose core purpose were to make proper use of basic research in natural science. The Academy for Technical Science is one such institute.
The increased focus on customer understanding will be an important source of competitiveness in the future. This is supported by recent developments in leading business clusters around the world. The practical use of human factor knowledge will be a key competitive factor in the future.
This may be approached in a variety of ways. The latest initatives coming out of Stanford are inspiring. Stanford University has set up 3 knowledge and innovation centres; Bio-X, Media-X and d.school. The centres are built on an interdisciplinary approach and aim to strengthen co-operation with the business community with regards to specific innovation projects. Bio-X focuses on biotechnology; however, the research efforts are combined with other research areas. Media-X is primarily focused on media research, but will also involve other research areas. d.school is a design centre which aims to combine design knowledge with customer understanding.
The university provides access to the necessary facilities but leaves it to interdisciplinary teams to compete for research facilities. The university then selects the most promising research projects. The three centers place emphasis on co-operation with private companies on specific innovation projects.
Other US universities have applied a similar approach. CITRIS at Berkeley is currently planning a research- and innovation project with the Alexandra Institute at Aarhus University, which in time will involve the participation of Danish and US companies.
The creation of interdisciplinary knowledge and innovation centres should take into account unique Danish skills and the structure of the Danish business community.
We recommend that a number of knowledge- and innovation centres that combine research on human factors with natural science, technical and commercial disciplines be established. The centres could potentially cover areas such as foods, health, medicine and medical devices, electronics, IT, energy and environmental technologies, fashion and housing. It should be made a condition that research and knowledge building is interdisciplinary and that the centres cover concrete innovation projects with the participation of private companies. To secure a coupling a knowledge building and business demands, the establishment of knowledge and innovation centres requires co-financing from the business community as well as from local authorities.
6. Networking. It is recommended that autonomous network organisations that may promote a networking culture within Danish business clusters be established. This will necessitate a public-private partnership, as public institutions often assume important roles in knowledge networks.
The networks are increasingly important to a company’s knowledge and competence building. Strong networks are thus important factors in economies, where innovation has become the key competitive element.
The analysis confirms that large companies and companies in strong business clusters have a proven track record in the area of user-driven innovation.
The analysis confirms that the Danish networking culture is underdeveloped as compared to the world’s leading business clusters. While this is hardly surprising, it underlines the need for a stronger Danish networking culture. A stronger Danish cluster creation will increase the proliferation of user-driven innovation.
The report highlights specific examples of autonomous international networking organisations. This is in line with several business analyses which shows that the presence of autonomous networking organisations is a precondition for the creation of strong networks.
Companies and knowledge institutions with a commercial interest in network knowledge sharing are not capable of running the network. The risk of a conflict of interest is too large. This also applies to traditional industry organisations, since they are supposed to manage their members’ interests. In Denmark and abroad we find examples of independent network organisations that have been established as public-private partnerships, but there appears to be a demand for additional networks.
7. Networking architects. It is recommended that courses in regional development and cluster creation be offered.
It requires a specific set of skills to successfully run a network. Among other things networks require interpersonal skills, as well as more down-to-earth tools. The increased focus on networks and the emergence of networking organisations underline the need for developing and communicating tools for network facilitators.
The seven recommendations presented above will strengthen the innovation efforts of Danish companies. User-driven innovation is merely one element in the renewal process that companies will have to address across the entire value chain. However, when looking at the markets where Danish companies compete, user-driven innovation remains one of the key factors in increasing competitive powers. A dedicated effort may propel Denmark to become one of the world’s most advanced countries in the area of user-driven innovation.

I was especially pleased to see the attention given to “knowledge centers” such as the Stanford University d.school. Too bad it doesn’t get the same attention from policymakers here in the US.
It should be noted that the Danish strategy is not just based on user-driven innovation, but on entrepreneurship (see the July 2005 presentation)
One other organizational part of the Danish strategy is the
Danish User-centered Innovation Lab (DUCI lab)
— a collaboration between faculty at Copenhagen Business School, Aarhus School of Business and Massachusetts Institute of Technology, based at Copenhagen Business School. Supported by both companies and the government, the lab works directly on best practices in user-driven innovation (Erik von Hippel is on the lab’s staff).
It remains to be seen whether Denmark will be successful. Fitzgerald notes:

Skeptics argue that Denmark is both small — population, 5.4 million — and a backwater of innovation, and thus has little to lose in trying something new. They might also point out that even in Denmark, Mr. von Hippel’s ideas are up against more conventional forms of user-aided design, such as sending anthropologists to study how people use products in their daily lives. Companies then translate their research into new designs.

I have to say that, however, that those “skeptics” may not know what they are talking about, especially if they describe Denmark as an innovation backwater. Not only is that incorrect, but the latest EU Innovation Scorecard listed Denmark as an innovative leader, while the US was ranked as an innovation follower.
Maybe Denmark is an innovation leader because of its innovation strategy that embraces bottom-up innovation? Maybe the US should think about that? Just maybe . . .

Update – anti-trust v. IPR

Update —
Ruling May Be End for Vonage – washingtonpost.com:

A federal judge yesterday [Friday] dealt a potentially fatal blow to Vonage Holdings, the Internet-phone service that offers one of the few alternatives to traditional carriers, by ordering it to stop using a technology that connects its network to the public telephone system.

The injunction does not take effect immediately. The judge ordered a hearing in two week’s on Vonage’s request for a stay. And Vonage says it is proceeding with a work-around. I also think it is possible that this will go to at least one level of appeals to see if the ruling conforms to Supreme Court decision in the eBay case on requirements for an injunction.
So, there is still a long way to go on in this case. As I mentioned earlier, this case highlights the tension between anti-trust/competition policy and IPR. Round one goes to IPR.

User-driven innovation – part 1

Sunday’s New York Times had an interesting piece by Michael Fitzgerald on user-driven innovation and the work of Erik von Hippel at MIT – How to Improve It? Ask Those Who Use It:

Mr. von Hippel is the leading advocate of the value of letting users of products modify them or improve them, because they may come up with changes that manufacturers never considered. He thinks that this could help companies develop products more quickly and inexpensively than with their internal design teams.
“It could drive manufacturers out of the design space,” Mr. von Hippel says.
It is a difficult idea for research and development departments to accept, but one of his studies found that 82 percent of new capabilities for scientific instruments like electron microscopes were developed by users.

As I have written earlier about bottom up innovation and Von Hippel’s work, it raises some important ideas about our innovation system. Most of his ideas I agree with. However, I have to disagree with the though that user-driven innovation will “drive manufacturers out of the design space.” If anything, it will do the opposite – as those companies without extensive design will be forced to seek out user-driven innovation and incorporate it into their products. A story in the Washington Post from a couple of years ago (Tapping Into Tinkering) pointed out how user modification of products is an established part of the US innovation system:

Fans of the TiVo digital video recorder have discovered how to break it open and install a larger hard drive. Early users of the Roomba, a robot vacuum cleaner, are rewiring it to serve as a “mobile security robot.” Owners of the new Sony PlayStation Portable have figured out how to use the game machine to surf the Internet and exchange instant messages.
. . .
Sometimes, tinkerers become a consumer electronics maker’s unofficial research-and-development team, with innovations winding up as built-in features down the line.
TiVo’s most ardent fans came up with a way to record TV shows by sending commands via the Internet long before the company got around to officially offering that feature.
And before the iPod was the ubiquitous gadget it is today, early users of Apple’s digital music player enabled it to store addresses and text files — a feature the company now promotes.
Customers also came up with the idea of recording their own talk and music shows and making them downloadable for the iPod — a phenomenon called “podcasting” that has become so popular that Apple recently rolled out software to streamline the process.
Americans have always liked to fiddle with things, from building better ham radios to juicing up car engines in the driveway. The urge fuels a multibillion-dollar industry in after-market auto parts, and automakers keep a close eye on how enthusiasts find new ways to use their products. Mitsubishi Motors, for example, sponsors teams that modify its Lancer Evolution performance car for auto shows.

Companies that let others seize that innovation are not going to survive. Or they will become simply contract manufacturers surviving in low wage locations. So the net effect will be an increase in design intensity of US firms.
And that would be a good thing.
(More tomorrow on a country that has embraced user-oriented innovation as a national policy).