Ever wondered what the common ingredient to trades, trading algorithms and Coke is? Easy! Intellectual Property! Agree that speculation is an IP industry? To understand the full implications for your trading income, look no further than Coca Cola: a lesson on capturing – or missing out on – the dividends accruing to intellectual property. The […]
Ever wondered what the common ingredient to trades, trading algorithms and Coke is?
Easy! Intellectual Property!
Agree that speculation is an IP industry? To understand the full implications for your trading income, look no further than Coca Cola: a lesson on capturing – or missing out on – the dividends accruing to intellectual property.
Colonel John Pemberton was wounded in the American Civil War, became addicted to morphine, and began a quest to find a substitute to the dangerous opiate. The prototype Coca-Cola recipe was formulated at Pemberton’s Eagle Drug and Chemical House in Columbus, Georgia, originally labelled coca wine.
Insight 1: True intellectual property, like a successful trading strategy, is the valuable product of hard, sustained effort.
He may have been inspired by the formidable success of Vin Mariani, a European coca wine. In 1885, Pemberton registered his French Wine Coca nerve tonic (…) essentially a non-alcoholic version of French Wine Coca.
Insight 2: Your strategy’s IP could inspire others roaming the markets!
The first sales were at Jacob’s Pharmacy in Atlanta, Georgia, on May 8, 1886. It was initially sold as a patent medicine for five cents a glass at soda fountains.
Insight 3: IP has a value – no-one who has worked hard to develop a successful trading strategy gives it away for free!
With that in mind, look closer at the Coke ticket (a beauty, BTW)
Notice the Trademark Logo – IP Protection. This way you had no way to use the logo (IP!) without 1) advertising Coke and 2) incurring in legal risk.
Insight 4: Successful creators protect the IP they disclose!
Insight 5: Successful market the product of IP but do NOT, repeat DO NOT, disclose their IP!
The business model of IP is to disclose, for a price, the product of the IP, not the IP itself! Coke buyers paid for a glass of patent medicine: they enjoyed the product of the IP (they drank it!), but NEVER, EVER got anywhere close to the formula (patent!). Pemberton (literally!) locked the formula in a vault to make sure that there was one and only one way to drink Coca Cola: to pay Pemberton for it, every time.
Wonder what happens if you don’t do that? Look no further than… Coke!
Pemberton was diligent in withholding IP from customers… alas not from partners. By 1888, three versions of Coca-Cola were sold by three separate ¨partners¨ who laid hands on the formula.
Insight 5: IP, just like your trading strategy, benefits ANYONE deploying it. When disclosing your IP, you’re waiving (some or all of) the future profits it generates!
Result? The Pemberton family, like the inventor of Vin Mariani before them, lost Coca Cola to those who got access to the formula, and made the most of it.
Insight 6: IP benefits copiers as much (if not more) than inventors: IP leakage hurt Pemberton, but it hurt the inventor of Vin Mariani so much, that we even ignore his name!
If you didn’t already, now you know. Your trades ARE the product of your intellectual property.
If you absolutely must, tweet your trades, sell your algorithm or explain your strategy and charting set-ups in your blog. But beware:
- If you disclose it all in one go, you could end up the unknown (= forgotten!) French guy who invented Vin Mariani (the Coca Cola),
- If you disclose it trade by trade, remember that valuable IP WILL BE reverse-engineered. Trades are NOT the IP itself, they’re the key to the vault. Incidentally, this is the reason why Darwinex will NEVER publish the track-record of our members. We sure certify that it is true, but that’s no excuse to compromising your IP!
- If you’re pitching to manage investor capital, DON’T disclose so much IP in your pitch that others can then replicate your strategy!
At all times, remember Pemberton:
- By all means, rent the IP: allow investors to benefit from your IP via fees… but
- NEVER give so much of your formula away that investors can replicate it without paying you going forward!
- Before tweeting, realize that markets learn 24/7. Once you disclose IP you will (at best) share the success of your intellectual property.
PS: if the content of this post sounds too trivial to you… feel free to recommend it to good traders roaming forums, engaging in mirror-trading / copy trading / social trading sites. Looks like they missed it: trading is Intellectual Property!